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jwither

Preparing for actual economic hard times

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jwither    10
jwither

This subject is not directly coin related but has come up on this board more than a few times. It should definitely be considered in both how much to allocate to your coin budget or to pay for any coin as an “investment”. I have a completely different perspective than most on what this means and, from the comments here, also what to do to prepare for it.

 

To be clear, while by conventional standards I am definitely a confirmed “pessimist”, I am not a “doom and gloomer” or expect the “end of the world as we know it” either as (at least) one other contributor who has posted here seems to believe.

 

The thesis of my outlook is one of long term economic depression which is likely to be worse than anything experienced in “modern” history, modern meaning the last few centuries where economic conditions have been documented in more detail than previously. I expect the standard of living for most people to decline in every or practically every developed economy and likely for at least a substantial minority elsewhere as well. I expect it to be a non-linear decline (that is, including temporary periods of improving conditions as I believe is occurring now). How much living standards will decline and for whom is yet to be determined but for many (hundreds of millions at least) yes, it will be substantial.

 

This is in contrast to the “doom and gloom” viewpoint which is apparently not expecting depression but economic destitution. If it ever comes to that, you can forget about any conventional financial and economic strategy saving you financially and this includes relying on the pitifully small amounts of gold and silver which the lopsided majority of “metal bugs” either do or are likely to own. (The same applies to the “guns and ammo” survivalist crowd in the US.) For anyone who needs an idea of what global economic destitution will look like, there is an (in)famous book in a religious tome that all or at least most of you should know which provides a vivid illustration of that future.

 

How to prepare for economic adversity will differ depending upon each person’s individual circumstances and there is no “one size fits all” answer. Aside from what I consider to be obvious considerations that are not necessary to spell out in detail here, below are the actions that I believe are the most important economically and that can be planned for in advance. As with a recent post, I have included a list and will cover each one in additional detail in subsequent posts. There is a lot more potentially to add since there are many books and regular publications dedicated to this subject, but I still think it’s a practical topic for most everyone.

· Arranging an alternate domicile

· Geographic asset diversification

· Economically adverse government policy

· Wealth preservation versus speculative assets

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Pierre_Henri    10
Pierre_Henri

These meltdowns are always predicted but never happen for longer than a year or three.

And even if it happens for a longer period, I will rather sit in my bunker looking at my coin collection than playing scrabble or monopoly.

 

We all differ when it comes to these predictions – I for one hate these doomsday prophecies.

 

Pierre

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jwither    10
jwither

Apparently, you did not read my post in its entirety or interpreted it differently from what I actually wrote. I specifically differentiated my outlook from a "doomsday" prediction and made it as clear as I could.

 

Partly, it depends upon your definition of :"doomsday". For example, if anyone here thinks that a return to the conditions of the 1930's such as existed in the United States cannot happen, my response to that is you are in DENIAL - plain and simple. There is nothing historically extraordinary about those conditions at all and they are not "doomsday" either. In actuality, there were many times before that when economic conditions were either actually or likely much worse, but most either do not know it or exact conditions were not recorded sufficiently On balance, the general ignorance of historic precedence everywhere is nothing short of incredible.

 

A second reason people disproportionately have this opinion is because of gross hubris in the ability of government to prevent declining living standards. There is no basis for that belief at all because the government does not create any wealth. Does anyone actually reading my post believe that the South African government has that ability? If so, based upon what? What about the United States or the governments in the EU which have much wealthier economies to mismanage? This is a rhetorical question because the answer is an obvious "no" because if they did, why are most people in these countries either no better or even worse off than they were not just in 2007, but in 2000?

 

A third reason is another type of denial.since most people do not want to face the possibility that their life will be "turned upside down" especially when they have a limited ability to influence the outcome. This is exactly what has already happened to uncountable millions just since 2007 and this has hardly been a "doomsday" outcome to this point. It is not a matter of all or even most of these people becoming destitute (which I specifically clarified in my introductory comments), but that their futures have or likely have been changed forever. I do not see how anyone can deny this statement.

 

I will grant you that this is a slow motion outcome. I first expected depression in 1996 or 17 years ago. It has not happened yet and it may yet require another 10 years before it becomes obvious to everyone. But by the time it becomes obvious, it will be too late to act. Preparation must occur before it is universally obvious. Since I know that the economic course of events is heading for a "train wreck", I do not use this as an excuse but as a welcome delay to prepare as well as I can.

 

Even now, the last two financial debacles have impaired or destroyed the net worth of millions. The consequences of this personal balance sheet damage will mostly be felt later, either when these people are older if the economy muddles through longer than I expect or most likely, during the next "bear" market in financial assets and probably real estate.

 

Personally, I believe that much of the world is already in a depression right now. It just is not the type of depression that most people are conditioned to expect. It is a "contained" depression which really started around 2000 by my count. In the US at least, the term depression invokes images of long lines at the soup kitchen, homeless shelters and unemployment office. Thanks to government programs and the convenience of the internet, not only have most of these people temporarily escaped the worst of this hardship, but they are also able to hide it from most anyone. Today, there are "SNAP" debit cards.(food stamps), Section 8 vouchers for housing and you never need go to the unemployment office.

 

However, below the surface, the economic rot and social decay continue unabated. Contrary to the hubris of the public, conventional economists and government officials, the day of reckoning still lies ahead. By "kicking the can down the road" and refusing to accept temporary hardship for a relative few in the past, these policies have virtually guaranteed that there will be extended hardship for uncountable millions later. And since these policies are practiced in most or all of the wealthier countries, the outcome is going to be similar everywhere with the depth of the contraction or depression dependent upon the social cohesion, culture, demographics, debt loads and current wealth in any particular country. However, carried forward to their politically expedient but economically illogical conclusion, what exists today will lead to economic bankruptcy everywhere. There is no doubt about that whatsoever.

 

As to whether you will be able to "sit in your bunker", that depends on what happens and it is impossible to anticipate those specifics in advance. Those who lived in Zimbabwe probably did not expect events that followed either and though the situation differs somewhat from South Africa, I am surprised that given the geographic proximity and time reference of those events that I would receive such a reply from you.

Edited by jwither

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jwither    10
jwither

Arranging an alternate domicile

For most people, where they live is an “accident of birth”. It is why I now live in the United States (even though I was born in the Netherlands), why most reading my comments live in South Africa and why each of us have our respective citizenship.

 

However, from a practical and economic standpoint, there are certain things that each of us need from government regardless of where we live and what citizenship we have. This is what makes one citizenship more valuable than others. These include: 1) physical protection of our person and families 2) the reliability of the legal system and private property protection and 3) the ability to earn a living. Viewed objectively from an economic standpoint, these are the real “value added” services provided by government. The rest is secondary or even counterproductive, depending upon each person’s philosophy.

 

Regardless of where anyone calls ‘home” or what passport you carry, I believe everyone should have a “back-up” plan as a contingency. I obtained my second passport last year and have recommended this to many others I know. If you cannot get a passport, at least get permanent residency.

 

While international travel is relatively unrestricted today (for those who can afford to pay for it of course) and immigration policies are relatively liberal (depending upon where you are from and where you want to go), no one should assume that this will always be true. If nothing else, deteriorating employment markets in many countries today and which are likely to exist almost everywhere under adverse economic conditions are going to make it more difficult to change your domicile in the future. Countries like Greece and Spain with “official” unemployment rates of 25% or more are not going to keep their borders open forever to non-locals. Getting your “get out of jail free card” in advance provides the best form of insurance that I know to reduce the possibility of finding yourself “stuck” or “trapped” in an unstable country later.

 

The choices available will depend upon your current citizenship and how much stricter immigration requirements become. Language and culture are other considerations. While I have a US passport, I would not necessarily consider it the first choice for someone else. For a wealthy person, my answer is no due to the tax system. Other candidates on the top of my list include Canada, Australia, New Zealand, Singapore, the UK and many countries from Latin America.

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Ron888    10
Ron888

Dear jwither,

thanks for posting. There are already "wealthy" countries like Sweden and Switzerland closing its doors. Just look at the Stockholm riots in the past days, is this a good place to live? So I would say the capital of Sweden is not, while the situation in the countryside may be totally different.

Just look a Switzerland. Years ago they opened their job market for everyone within the EU. They have been flooded by Germans, now they are flooded by Spanish people. Swiss politicians say, that there are enough people within Switzerland and they restrict immigration.

 

In my view it is not only economic hardship what we will see in the next years. Since two years we are seeing more seismic activity in the Pacific, like vulcano eruptions. underwater eruptions, tsunamis, earthquakes... There have always been phases of seismic activity in history, like at the end of the Bronze Age. Then it was in the Eastern Mediterranean Sea, now it is the Pacific. Only mother nature will know how long this period will last. But I feel that there is still much to come. So I personally would avoid New Zealand, Chile (just think of these early Chilean vulcano pesos!), California, the Northwest of the US and Japan. - Just my view!

 

I agree that Australia and Canada are much better than other countries. In my view South Africa is no bad choise if you stay away from the big cities and the eastern part of the country. Despite it is self evident for you, some things are not for me. I grew up in a town a few kilometers away from a military base with nuclear weapons (with US military). Quite recently it was revealed that there were already spys from Eastern Europe in-town....

 

So far as I know South Africa has no nuclear weapons, no biochemical weapons and only one atomic power plant. South Africa is solid in geologic terms, but it is not in political terms. ANC rule ist not forever. South Africa will have much better politicians in the future.

Edited by Ron888

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jwither    10
jwither

Ron,

 

I am not knowledgeable on the geological aspects, so I will pass comment on that.

 

Generically, I consider poorer and high density population centers and countries to be the least optimal places to live under conditions of economic duress. (I actually prefer urban to rural areas.) So by my reckoning, I would rate countries in Asia and the Islamic world last while I would rate North and South America and Australia first. Europe and Africa, it depends upon the specific location. I still think for the most part that Europe is a better choice depending upon your financial circumstances.

 

Countries in Asia, Africa and the Middle East also disproportionately have less arable land that can be used productively. (This is aside from the cultural differences which are too big for my tastes.) So many countries are actually a lot more crowded than might be apparent. A colleague of mine is from Ghana and he told me that this country has a population of 20+ million in an area about the size of the US states of Utah or Arizona. (about 90,000 SQM or 250,000 sq km). By contrast, Bolivia has an area almost five times that large (about the size of SA) with less than half the population and a higher proportion of the land is probably usable. So by my standards, Ghana is a fairly crowded place. This is today and does not even consider future population increases which will make this problem even worse.

 

Also, if you are a minority with above average wealth, I would also be hesitant to live somewhere where you will stand out in adverse economic times. You are more likely to be a target. Probably a place like the Canadian maritime provinces is as close to an ideal place as exists. I have been there several times. It is in a stable country, fairly remote and one of the least likely to be in a war zone if it comes to that. The problem with a country like Bolivia (where I have family) is that it is a resource rich but economically and militarily weak country surrounded by more populous and powerful neighbors. That could spell trouble in the future and has in the past. For those who do not know, Bolivia has lost more than half its territory since independence in 1825. A country like Australia is usually considered safe and it is relatively. However, I believe the Pacific has a high probability of being "ground zero" in a future geopolitical conflict.

 

For South Africa, I do not share your optimism. I believe it is likely to fare better than most other African countries but probably that is not really saying much. I also see no reason to believe that future governments will be any better than the one now or those in the past. I am not familiar with the specifics there but I do not believe it is an understatement to describe economic conditions for most there now as worse than those in the US in the 1930's. There is a lot of poverty in SA and it is widespread. The difference is that people are used to it and as a result, their expectations are much lower than in the developed world.

 

All I know is if that I lived there and it was the only option I had now in terms of citizenship, I would be planning for contingencies. For anyone, the actual optimum economic strategy during really "hard times" is probably to have your money in one country (or more), live in a second and have your citizenship in yet a third. The reason for this is that all governments invariably tend to treat their populations and especially citizens as disposal resources to be used in the "national interest" when it is convenient to do so.

Edited by jwither

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Ron888    10
Ron888

Dear jwither,

 

thanks for replying. No one ever has yet understood, why I am optimistic for South Africa. First it will get worse and worse, but my optimism is in long term.

 

I have distant relatives living in British Columbia, and I think it must be a great place to live.

 

For economic strategies I focus now on growing my own foods. And collecting seeds. Just to be as much independent as possible.

 

As far as I know Bolivia lost it´s costal provinces to Chile more than a century ago. I think it is no disadvantage to have no access to the open sea. Future wars will be short-lived, and it is nearly impossible to occupy countries with much mountainous regions. Just look at Afghanistan. The last successful conqueror of Afghanistan was Alexander the Great. The British Empire failed, the Soviet Union failed, and now the international forces led by the USA are failing.

 

Years ago I was optimistic for Chinese coins, when they were leftovers. Then a big auction house in China promoted Chinese coins instead of stamps. Within some weeks prices multiplied and have never been cheap again.

In general terms I have changed my opinion about China completely. I don´t see great economic opportunities in this country anymore, but I feel that China is a threat to all counties in the Pacific Region. Even if they say they don´t back North Korea, I am sure they do. Otherwise Kim Jong-un would never been so naughty like he is. I think China`s greatest power is not it`s military, it is their economic power and their currency. If they will back their Yuan with gold, this will cause great troubles to the Dollar and the Euro. China is a dragon who can attack out of thin air.

 

Just my view. Thanks for reading!

Edited by Ron888

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jwither    10
jwither

Yes, in times of economic difficulty, increasing self-reliance is a practical strategy. That along with cooperation with friends and community are likely to be the best options for most people, especially those who either do not have the economic capacity to leave or cannot obtain access to go somewhere else. The lack of self-reliance is one of the things which have the possibility to make the next depression worse in many ways than those in the past.

 

You do not say why you are optimistic on South Africa. All I can tell you is that, while it is more stable than many others, that hardly makes it an optimal or even acceptable choice to use as a base during adverse economic conditions. I'm not saying the economy will completely "fall apart" because I do not know or necessarily believe it, but at minimum I expect those who hold their wealth in Rand assets to lose a lot of their domestic purchasing power through inflation (as opposed to the countries with "hard currencies") and international purchasing power from the exchange rate. If you have most of your assets in a currency and its international purchasing power collapses, you will be stuck regardless of whether you can still maintain your lifestyle locally.

 

Many people, especially those with money, have historically tried to immigrate to the US and obtain US citizenship. To make living, I still think it is one of the best choices. But if you have a lot of money, forget it. I consider it a huge mistake because taxes are applied to worldwide income regardless of whether you live here or not. My brother lives elsewhere and I have told him to not register his child here as a US citizen. He can do it at any time later if is necessary. I still think the US will be a better place to be than most, but this country is going to have big economic problems.

 

On your comments on future wars, I disagree with you. I expect there will be more of them, not less because war and depression go hand in hand. This is historical fact, so there is nothing extraordinary from this claim. The nature of the conflict will likely change for the reason you give but not otherwise. The US "lost" the conflicts you mention because it attempted to fight a "humanitarian" war. In the depression, such niceties will either be observed less or not at all. The incidence, level and duration of what I would describe as traditional warfare methods will return, just with modern weapons and technology. True, terrain poses the challenges you mention for an occupying force, but that doesn't mean that anyone who is caught up in a conflict will not have their lives wrecked. Operating under the assumption that this was a possibility, I would rather take the precaution I just mentioned than live in the proverbial cave.

 

I do not believe that large scale conflict is an immediate risk, but I see it as a longer term one - many years from now but still within my lifetime. Whatever anyone may think of the United States and its predecessor the British Empire, both made possible a relative golden era of peace and prosperity. By this I mean that if neither had been dominant, I believe there would have been more conflict and the eventual end of Pax Americana is going to create chaos until the subsequent power transition is complete.

Edited by jwither

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jwither    10
jwither

Geographic asset diversification

This topic covers not just the ownership of assets in multiple political jurisdictions but also where they are physically located or for financial assets, legally domiciled. History has many examples of wealthy individuals who were forced to leave their home country on short notice under adverse circumstances who left with little or even nothing.

 

This is one of the reasons why I have warned on overeliance on coins as a “hedge” against “hard times” (which I do not even believe are that hard at all as some on this board seem to believe) for those of you in South Africa (though it applies to everyone to one degree or another). An asset, no matter how valuable, will do you no good if you cannot take it with you or do not have access to it. And it will be much less valuable to you if you have to sell if for pennies on the USD or Rand which is exactly what will likely happen if you have to sell coins in a real emergency.

 

This applies equally to financial assets. If you own shares or a bank account but they are either expropriated or subjected to capital controls, they will do you either less good or no good at all.

 

The simplest and first option that I believe should be used to mitigate this risk is to open a foreign bank account. I do not consider most banks financially sound, but that is of primary importance only if you are looking to keep a large or disproportionate amount of your funds for the longer term. Even if the balance is a nominal amount, at least you will have it set-up in advance where additional funds can be wired on short notice.

 

A second consideration is the alternate jurisdiction selected. My first choice remains Switzerland for the reasons recommended by the SafeWealth Group. However, others are currently acceptable if for nothing other than a temporary back-up option.

 

Once the jurisdiction has been selected, then I would consider the acquisition of less liquid or physical assets. For example, if you are really “rich”, you could buy a property. Financially, I believe that most real estate is going to be an absolutely awful “investment” in the upcoming depression, but at least it will be useful if you can live in it or use it to grow food. I would only use this option if you can actually afford to lose all of your purchase price – and I do mean all of it.

 

For precious metals, my first choice if you can afford the minimums is the SafeStore system offered by the Safewealth Group. For third party storage, probably the only other I would consider (longer term) is the Perth Mint. However, the last time I checked, their mark-ups for allocated storage (as opposed to unallocated which was offered at no charge) were exorbitant. A third option is to store metals with someone you know outside of your home country, but obviously for this to work, that person must be reliable and the country selected must remain stable.

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Guest Guest   
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Stacking silver and preparing to move to a remote island in Fiji......

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jicol    10
jicol

"Once the jurisdiction has been selected, then I would consider the acquisition of less liquid or physical assets. For example, if you are really “rich”, you could buy a property. Financially, I believe that most real estate is going to be an absolutely awful “investment” in the upcoming depression, but at least it will be useful if you can live in it or use it to grow food. I would only use this option if you can actually afford to lose all of your purchase price – and I do mean all of it."

 

My opinion is that one should not ignore property.Residential property satisfy one of the basic human needs,which gold,silver,bonds,stocks etc do not,and is considered one of the least risky investments.Even in a depression people need to live somewhere.Also property is one of the few investments you can leverage.

 

But then one must also diversify both geographically and type of investment and of each holding you have you must ask yourself 'if I lose all of this,will I still survive'

Edited by jicol
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jwither    10
jwither
Stacking silver and preparing to move to a remote island in Fiji......

 

Unless you are going to be almost entirely self-sufficient (and no, I do not expect you to answer), I do not see that Fiji is necessarily any better than Australia where you live now. I think it is worse since I see Australia as better than most. Also, I hope you plan to store your silver somewhere else (or at least most of it), because whether you are self-sufficient or not, I do not believe it is practical to transport it to a place like that in any quantity.

 

I have mentioned here that I have family in Bolivia. Well, I do not believe that storing silver (or other physical valuables) makes any sense either and yes, I have thought about it. Not in any quantity. Getting it in and out of the country I think is potentially too risky and it may raise too many questions. Fiji is more developed to my knowledge but I see it as too remote. I see the same obstacles in most other countries unless you know the "right" people to circumvent them.

 

In many or most countries, the other issue I see is actually exchanging silver for the things you need to buy. I believe that this would be somewhat easier in Fiji (for whatever is available to be bought which I still think is less than elsewhere), but I'm not convinced that locals in many countries like Bolivia will accept most of the forms of silver that are preferred elsewhere to exchange them at their then current market value. They have either never heard of them or are not used to them. I have never seen nor would I expect to see better known coins such as ASE, Maple Leafs, or Krugerrands. Same goes for fabricated bars. Most people in countries like that either do not have the money to buy and own them or have no use for them. I presume that in Fiji you will plan to use British Commonwealth silver coins.

 

More likely, in a country like Bolivia, they would accept 19th century South American silver coins as those are the ones I have seen sold in the markets. Its probably better than no option at all but acquiring those in any quantity is a real challenge and I expect that there would be a lot of "slippage". I know that you do not agree with this, but for the foreseeable future, USD currency notes are still better for this purpose than either gold or silver. In other countries, Euro, GBP or CHF might also "work".

Edited by jwither

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jwither    10
jwither
My opinion is that one should not ignore property.Residential property satisfy one of the basic human needs,which gold,silver,bonds,stocks etc do not,and is considered one of the least risky investments.Even in a depression people need to live somewhere.Also property is one of the few investments you can leverage.

 

But then one must also diversify both geographically and type of investment and of each holding you have you must ask yourself 'if I lose all of this,will I still survive'

 

Jimmy,

 

In the context you are describing it, I do not consider land or real estate an "investment" at all. It is more of a consumption item and this is the same way I see my house where I live now. For someone who can actually afford to buy it and keep it under adverse circumstances and does not mind losing some or most of their outlay, I would say go ahead and do so, but not otherwise.

 

Also, your comments imply that real estate could be bought for rental under these circumstances. Well, I am sure that people did that in the US during the 1930's but it was a very poor choice. They did not have it expropriated and I do not expect this in most countries under the circumstances that I see, but its value fell for a long time and I expect the same outcome later. Most people do not know this, but in the US, property prices lost value until 1949, even after inflation returned in the early 1940's.

 

You are correct that people need a place to live but you also need to consider that even today, there is a huge glut of residential properties in many countries based upon what people can actually afford to pay. This is the result of the property mania in the last decade where artificially cheap money and absurdly lax politically directed lending standards enabled legions of people who had no business getting a loan to get one. Sure, a limited rerun since the 2008 crash has improved property markets somewhat, but the underlying dynamics have not changed.

 

When the next financial crisis hits, I expect even more people to suffer losses in the financial markets and lose their jobs than they did in 2008. With fewer jobs and savings, there are going to be a lot fewer people who are going to be able to afford to pay any rent at all and many will not be able to pay their mortgage either. I also expect (probably contrary to what some believe here) that governments are going to be forced to scale back housing subsidies but even if they do not, there should be millions of empty homes both in the United States and elsewhere.

 

As a landlord, you may be able to keep your property rented by cutting your rates (which many others foolishly will not), but this could or will cause a cash flow problem especially if you use leverage. In the circumstances that I see, using leverage in the next depression will be a disaster. Since most here probably expect inflation, you are probably anticipating the opportunity to benefit by paying your debts back in cheaper money. Personally, that is the last thing I would do.

 

So given what I am saying, where will people live since they need shelter? They will do what they always did before, whether they like it or not. They will be forced to "double up" in developed countries just like those in Asia, Africa and Latin America do now. The idea that everyone is entitled to live in their own home regardless of whether they can afford it or not is a modern day political fiction and in the future, I expect it to be exposed for the nonsensical idea it always has been. This has already increased to some extent (specifics unknown) in the US since 2008 which is part of the reason the property market has been so weak.

Edited by jwither

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Ron888    10
Ron888
Unless you are going to be almost entirely self-sufficient (and no, I do not expect you to answer), I do not see that Fiji is necessarily any better than Australia where you live now. I think it is worse since I see Australia as better than most. Also, I hope you plan to store your silver somewhere else (or at least most of it), because whether you are self-sufficient or not, I do not believe it is practical to transport it to a place like that in any quantity.

 

I have mentioned here that I have family in Bolivia. Well, I do not believe that storing silver (or other physical valuables) makes any sense either and yes, I have thought about it. Not in any quantity. Getting it in and out of the country I think is potentially too risky and it may raise too many questions. Fiji is more developed to my knowledge but I see it as too remote. I see the same obstacles in most other countries unless you know the "right" people to circumvent them.

 

In many or most countries, the other issue I see is actually exchanging silver for the things you need to buy. I believe that this would be somewhat easier in Fiji (for whatever is available to be bought which I still think is less than elsewhere), but I'm not convinced that locals in many countries like Bolivia will accept most of the forms of silver that are preferred elsewhere to exchange them at their then current market value. They have either never heard of them or are not used to them. I have never seen nor would I expect to see better known coins such as ASE, Maple Leafs, or Krugerrands. Same goes for fabricated bars. Most people in countries like that either do not have the money to buy and own them or have no use for them. I presume that in Fiji you will plan to use British Commonwealth silver coins.

 

More likely, in a country like Bolivia, they would accept 19th century South American silver coins as those are the ones I have seen sold in the markets. Its probably better than no option at all but acquiring those in any quantity is a real challenge and I expect that there would be a lot of "slippage". I know that you do not agree with this, but for the foreseeable future, USD currency notes are still better for this purpose than either gold or silver. In other countries, Euro, GBP or CHF might also "work".

 

Thanks for this information!

 

I recently read that one former wallstreet-trader (age 39!) has savings of USD 10 billions (!). If he would buy crown-size silver coins at a price of 25 Dollars per coin, he would get 400 million coins. The silver ounce is now at 22.30 per ounce at kitco. I doubt if 400 million crown-size silver coins are available at all!

 

With the Pittman act in 1918 about 270 million Morgan dollars were melted down. Germany melted for it´s 1972 olympic commemorative coins Morgan dollars down. And many of these olympic coins have again melted down. When most European countries changed from their national currencies to the Euro many, many people gave their silver coins back to the banks, nota bene: at face value!

 

I don´t see much historial silver coins offered in Europe right now. Yes indeed, I saw Morgan and Peace dollars and Austrian silver Schillings for cheap at one well-known dealer. And when I wanted to order, I got the information that these coins are limited at "only one" per customer.

 

If we look at Mexican silver coins in the past century, we see that these crown-sized silver coins started with one Peso and at the end of the century the nomination was 100 Pesos. This is inflation. This was then. But now we live in a world of digital money!

 

Just look at Cyrus: Before this country entered the Eurozone it didn´t have major economic problems. With tourism, argriculture, sea ports and British military bases this country had a solid basis. After entering the Eurozone they were creating money out of nothing, billions of Euros!!!Banks in Cyprus were paying high interest rates and they attracted more and more money. It seemed that everything was fine! But within one day to the other they were bankrupt and the banks closed for ten days. Most savings were LOST.

 

If you think Cyprus was an error or mistake, you are wrong. I am sure this was planned by those higher up just to rip off common people, like you and me. And if you think these fraudsters want to rip off only people in Cyprus and Greece, you are wrong. Within the European Community in more and more countries cashless payments are required if the amount is greater than 1000 Euros (Italy) or 2500 Euros (Spain). Or if you pay cash, you can´t reduce income tax. Cashless money is just to control and tax average Joe!

I am quite sure if we see a future stock market crash it will be a flash crash. Within minutes or over a weekend. And most of the savings will be lost then! Paper money will be nearly worthless then, while (historical) silver coins will have it´s value. And much more purchasing power!

All this will happen out of the air, and there will be no time to react for average people.

 

People in Cyprus, who once were rich and are now beggars, understand by the hard way in which time we live right now. It is a time of fraudsters!

 

A Peace or Morgan silver dollar will always be a silver dollar. It is still the same Dollar, one silver dollar with around 24 grams of silver. Whatever kitco quotes may say. While paper money has always gone to nothing.

 

 

Just my view!

Edited by Ron888

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jwither    10
jwither

Ron,

 

I think everyone should own some silver, gold or both. I have said so from when I started posting even though I thought that prices would go lower at the time but it did not. I still hold the same opinion. Silver (or gold) should be owned because they are real money but they are not the "be all and end all" of financial risk management. They are one component of an integrated financial strategy and by this I am not talking about conventional portfolio diversification which includes shares and bonds. I still expect most who have most of their wealth in those two to suffer crushing losses when the "bear" market resumes.

 

As I said at the time, if you can afford to own some of either or both and do not mind the possibility that you will lose value if only in fiat money terms, then by all means buy it. But only buy what you can actually afford to keep under adverse economic circumstances. Owning silver now will work against you financially if you bought it at higher prices and are then forced to sell it later at lower or much lower ones because you had to do so. This is something that I do not believe any "metal bugs" really take into consideration because they do not seem to ever envision the possibility that they will be wrong.

 

I still think that silver is going to end up lower in USD terms as I did before. But it was a mistake to not own more of it when prices were lower just I think it was a mistake for "metal bugs" to go "all in" during the run up to recent bubble (and yes, it was a bubble of sorts though I think less than the 1980 peak). At the recent low of $20, it has now reached my (revised) minimum downside target which is where the "lift-off" phase started two years ago. You can see this on a chart. So I am now looking to buy it in relatively small quantities at somewhat lower prices than now but I will be looking to buy a lot more of it on any additional substantial weakness. And if it falls to the level I originally expected when I started posting here (below $8.39 last seen in October 2008), I will buy a lot of it.

 

If you go back to 1980, those who have owned either gold or silver at the peak of that mania 33 years ago have lost a lot of their purchasing power because both sell for less now than then (silver even in nominal terms). Any non-Swiss who has owned the CHF (the preferred "strong" currency") since 1980 has also suffered a huge opportunity cost because of interest rate differentials.

 

What you are describing for Cyprus is actually a form of deflation, though most do not see it that way. It is also the difference between actual printing and what most incorrectly view as "printing" today. What you are actually describing is debt which was subject to and did default. When the next crisis hits, I expect a lot more defaults and asset price deflation which will reduce almost everyone's purchasing power.

 

On your comments covering silver's future purchasing power, I do not see the same outcome. I consider it likely that silver will be worth more when it comes to buying goods and services that people will not need because there should be at least a huge temporary glut of them, but not the goods that people actually need to buy. On the latter, I think it will be a "mixed bag" with silver buying more of some and less of others.

 

Taking the price of silver today, at today's close of about $22.50, is it really that cheap compared to the retail price of gasoline, various food commodities and housing? It varies depending upon where you live but based upon prices in the united States, I do not think so.

 

In the metro Atlanta area where I live, you can easily buy any number of houses or apartments of varying sizes for between $50,000 and $100,000 which are decent size or large by international standards and they are not in bad neighborhoods either. I doubt very much that a comporable house could be bought for 2,000 to 4,000 ounces in the 1950's before fiat money inflation became the norm. Since prices always fluctuate for both, it depends upon the specific point in time but the point I am making is that the ratio between the two is probably not outside the historical long term average. If anything, silver is probably overpriced today when considering that many houses are better than those in the past, maybe not always in their construction but certainly in size and amenities. And in making these comments, I still expect housing prices to lose more value later because they are still inflated due to artificial credit.

 

In one episode of the Agathie Christie series "Poirot", Inspector Japp makes the comment that the six shillings (with slightly more than one silver oz) he paid for his small packet of choice beef cuts was enough to pay a house cleaner for three days. The series takes place in late 1930's Britain and it is probably reasonably accurate of the time. Today, a small packet of beef costs nowhere near $25 USD.

 

The point of these examples is that the idea that the typical "metal bug" is going to enjoy a windfall in their purchasing power is fiction. Those who are wealthy or at least affluent, the collapse in the prices of non-essentials should create a windfall for them. In theory, they should be able to get all the hired help for a similar pittance as they could in the past and of course, the cost of essentials is not going to be an issue either. For everyone else, it is equally likely that the limited funds they will have available will buy less because the likely corresponding decrease in economic activity and particularly international trade is going to reduce the supply of many things that people actually need. So while those who own silver will be better off than if they did not have it, most will still likely be worse off than they are today or in the recent past.

Edited by jwither

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jicol    10
jicol

 

In the context you are describing it, I do not consider land or real estate an "investment" at all. It is more of a consumption item and this is the same way I see my house where I live now. For someone who can actually afford to buy it and keep it under adverse circumstances and does not mind losing some or most of their outlay, I would say go ahead and do so, but not otherwise.

 

 

Thought you may find these two graphs interesting:

 

http://housepricesouthafrica.files.wordpress.com/2011/01/sa-house-price-in-gold-ounces5.png

 

Global house prices: Location, location, location | The Economist

 

Yes I was talking about renting out property and keeping it long term, specially in the so called entry level market, and not speculating.In difficult times rent will go down and people will downscale and share but they still need a place to live in.The point of the graphs are that there are long term cycles for everything.

 

You made the point that we are not talking about a dooms day senario like a war and your house gets bombed and it is gone but then you may also have to swap your gold coins for a meal and they are gone too.

 

So come the next depression I will accept your gold coins for rental and at the end of the depression I will have your gold coins and still have my properties too :-)

 

Jimmie

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jwither    10
jwither

I could see the first chart but not the second. I am not familiar with housing prices in SA but it seems to me without having a basis of direct comparison to the US, that they are very expensive in your country given the levels of income and wealth available to buy them. Going from that chart alone, my preliminary opinion is that they are vastly inflated and I would far prefer to buy one elsewhere, if I were to buy one at all.

 

By my standards, 1979 to now is not really "long term". Sure, it is so for a single lifetime but not in the context of long term cycles. And by longer term cycles, there have been no real "hard times" during this period except in isolation or for certain population segments. ("Hard times" are relative and not absolute".)

 

The point I was trying to make as with metals is that if you can afford to own the home and keep it and do not mind losing money on it, then it is a personal decision. So go ahead and do it. But I do not believe anyone can make any compelling case whatsoever that buying most properties today is going to result in anything close to a favorable economic outcome over any extended period of above average economic duress because real estate is no more of a hedge against 'hard times" than coins as some on this board claimed.

 

For rental purposes, entry level properties (assuming we are using the same definition) are better than "upscale", at least in the United States. However, the risk that exists here is that the area where the house is located can deteriorate which will not just temporarily impact the value of the property in the short term, but put your whole "investment" in jeopardy longer term.

 

There are areas in the US which are in long term secular decline. They are losing population or the population is stagnant. Those that remain (the "left behinds") are disproportionately lower income (since they are economically trapped). The result of this is an urban wasteland. The worst of these areas like large section of Detroit are virtual "ghost towns". Other areas like SW California (aka, the 'Inland Empire") had huge booms during the bubble but they are not compelling places to live which is why few wanted to live there in the past. There are few jobs there and most must commute to the coast.

 

In South Africa, what I am describing will differ slightly but I expect that fewer or far fewer will be able to afford a property valued at $170,000 today. And though I have the perception that there is a shortage of quality housing in many countries which is why prices are frequently higher than in the US, that still does not mean that they will be able to pay today's market rents. Prices (including rents) are not based upon what people "need' but upon their economic capacity to pay. And in a real depression, almost everyone will be able to afford less or a lot less.

 

What I described for entry level properties, the dynamics differ for upscale but I still consider real estate in general overpriced or vastly overpriced practically everywhere because it is significantly inflated by credit. Longer term, I expect credit availability to decrease, its cost to increase or both essentially everywhere, regardless of what economic gymnastics government's attempt.

Edited by jwither

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jwither    10
jwither

Economically adverse government policy

Under the first consideration, I listed what I consider to be the primary economic services which governments provide that actually have real economic value. What I cover here are what I believe to be the primary financial dangers government’s pose in their (supposed) quest of the “public interest” (which in actuality is lopsidedly for the benefit of elites). There are five which I list below and will cover each one separately:

· Foreign exchange and capital controls;

· Tax policy;

· Pensions and retirement accounts

· Metals ownership

· Government reporting requirements

 

The first is foreign exchange and capital controls. These are not identical but I am not aware of one instance where both have not been implemented together. For those who do not know what these are, exchange controls are intended to prevent you from converting (or make it prohibitively expensive to convert) the local currency to another. The second likewise for sending your money out of the country.

 

Examples of countries which currently use both are Venezuela and Argentina. In both instances, the exchange value of the local currency has crashed against “hard currencies” such as the USD. (In this instance, I’m not actually aware that either prevents you from sending Bolivars or Pesos out of the country, but then no one in their right mind from elsewhere wants either to my knowledge. Expatriating FX is not permitted.)

 

If anyone wants to get an idea of how much damage this policy can do to your finances, you need look no further than the difference between the “black market’” and “official” rate. In Venezuela, I believe it is 75% and in Argentina, almost 50%. In Argentina, the “official” rate is now about 5 pesos/USD versus over 9-1 on the “black market”. On my last trip to Argentina in late 2000 before the currency board collapsed, the FX rate was one-to-one or at parity. In other words, to get out of the local currency, you are required to forfeit one-half to three-quarters of your wealth to escape potential future losses. And to make it clear, this is in addition to any loss already incurred to the time of the conversion which for Argentina was already 80%. Further, this still assumes that you will successfully be able to send your funds out of the country after conversion which is hardly guaranteed.

 

Sometimes, these losses are offset by interest rate differentials but usually or even always, it is only temporary. In actuality, high interest rate differentials are a warning sign of increased credit and depreciation risk.

 

Personally, I expect a lot of countries to impose both in the future and it may even occur globally in a future financial crisis. It could be coordinated by an agency such as the IMF. If your money is trapped in the wrong jurisdiction, it could result in economic disaster for your economic future.

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Guest Guest   
Guest Guest

FIAT is a PONZI

 

See this link

 

at 50 and 90 secs.. the excuses

at 180 secs.. the trick ("the committee" at the US Federal Reserve are private bankers)

at 240 and 360 secs the FIAT PONZI scheme

at 280 secs listen to what he says about the serfs (slaves aka "the labour market") you and I are beholden to this Ponzi scheme

 

remember this guy runs America.... and FIAT has counterparty risk (read the debt exposure of BIG banks)

 

Guess what assets have NO counterparty risk?

Edited by ndoa18

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jwither    10
jwither

What exactly is the specific point of your post? I do not see one and you have made this type of comment over and over in the past repeatedly.

 

You and I agree on some things and disagree on others. In both my prior posts elsewhere and here, I agreed with you that everyone should own some metals. But when I made the comment here that owning metals is not the " be all and end all" of financial planning, I was specifically referring to positions like you (and other "metal bugs") apparently hold. Because in every post I recall of yours, that is either the implicit or explcit recommendation you make.

Edited by jwither

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Ron888    10
Ron888

I am obviously a "metal bug", because this is a thread about coins :-) Depending where you live, I would take water, foods and seeds first. In my view it is a problem that common people can buy some silver coins but not a hacienda in Argentina!

 

Well, when it comes to inflation, I would NOT take Argentina as an example. Oddly enough, since this country has come increasingly under the influence of elitists, it's the ordinary people who´s living conditions getting worse. The elitists own many, many of these large farms. And what have they done? They have less and less cattles in Argentina, reduced forests and where possible grow soybeans. And they sell these to the red dragon, because this gives them the greatest possible profit. And when the land dries out and not all in Argentina have enough to eat, then they do not care about that!

It is greed and hate what a country destroys. And when they say, it would of climate change and inflation, that's a lie. Inflation is a cold control (or as you may always call it). And the bad thing is that most people do not understand how it comes to inflation, and who profits from it the most. Certainly not the grocer, because that is only the last link in the chain. And when the dollar collapse happens, and it will, you wouldn´t get much foods for nearly worthless paper money. In "hard" times you had always pay with hard cash!

Edited by Ron888

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jwither    10
jwither

Ron,

 

I am not clear about your references to Argentina because what you described about elitist control, it exists in every country. The specifics just differ. It is true in the United States, China, Russia, the UK, Italy, South Africa, Panama and Bolivia as examples. The last two I know because my father lives or lived there and South Africa from a book titled "South Africa Inc" (The Oppenheimer family) though the latter I presume has changed somewhat since the 1994 elections. (This book was written in the 1980's.)

 

But in any event, I consider planning for the "USD crash" as implied by the "metal bugs" to be completely different from what we are about talking here. If you go back and read my initial comments, I specifically excluded a "doomsday" scenario from this discussion intentionally and whether those who believe in its inevitability know it or not, if the USD "crashes" as they imply, it will be one. A sudden collapse of the global fiat monetary system (which would almost certainly happen along with the USD) would lead to more than just a global depression but widespread economic destitution, as in abject poverty. Under those circumstances, you can expect a collapse in production and international trade and along with it, widespread if not world war. Good luck with owning silver or gold saving most people from that because it is not going to happen. The idea that the fiat monetary system will suddenly collapse while economic life continues more or less "normally" is a complete pipe dream. And so is the idea that government's (as long as they retain the capacity to prevent it) would ever allow any noticeable number of people to obtain a huge economic windfall through gold and silver ownership while huge numbers of other people are destitute because it isn't remotely likely to happen either. Only or mostly those who are politically connected and the typical "metal bug" doesn't fit that description.

 

The description you are using sounds to me more like the events during the US Civil War (1861-1865). Those were actual hard times as opposed to the imitation which those on this board who have used this term seem to imagine as the "real thing". If you lived in the American Confederacy especially toward the end of the war, I am sure that owning silver coins (which were in great shortage) was much better than owning "Greenbacks" or Confederate currency. We are nowhere near this "flash point" or anything like it now, not in the US, not in Germany (where I believe you live) and not even in South Africa.

 

Nothing lasts "forever". I know that. This does not mean that we should all be planning for the inevitable end of the current economic system because contrary to the apparent beliefs and claims of the hyper-inflationists (which is exactly what you are describing), the overwhelming evidence today argues against it. If I need to support this opinion, I can start another topic and provide as much historical precedence and evidence from the way people actually act to support my position. (By making a reference to the way people actually behave, I making a specific contrast to the ivory tower world filled with economic robots dreamed up by the hyper-inflationists.) This does not prove that hyperinflation in the USD (or other "hard" currencies) is "impossible" but I have yet to see one coherent and thought out argument anywhere (and I do mean even one) to explain why it should be believed as an imminent outcome.

Edited by jwither

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Ron888    10
Ron888

Yes, I am living in Germany. - Argentinia is the most controlled country by elitists in Latina America, because it is "rich" in agriculture. Where is nothing to win e.g. jungle of Suriname - there are NO elitists!

 

We had already a flash crash at the stock market on May, 6 2010. Some stocks lost 99 % per cent of it`s value within minutes. How is this possible?

Greg Smith, a former Goldman trader said, that the official reasons can NOT be true. He claims that he was a trader in these futures, and this can´t be the reason. Why should people trust a private central bank when they don´t trust in (most cases) their relatives, neighbours, priests and politicans???

Edited by Ron888

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Guest Guest

The Wall Street Journal's Ponzi game

 

You too can be "helicopter" Ben Bernanke in this amusing game featuring the US Fed Chairman.... and developed by the respected Wall Street Journal.

 

keep your finger on the SPACE bar to play and see how much money you need to dump to just keep FIAT afloat.... then explain why FIAT is not a Ponzi scheme.

 

take this link

 

Scott

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qball    10
qball

Please stick the topic. Further outbursts will be removed and users banned.

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