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Petr Message Board

  • ilap2004 ilap2004 May 11, 2010 4:07 PM Flag

    The Metals Breakout Continues

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    • The overly indebted OECD countries only have one choice and that's to somehow deal with the debt.

      they can't come right out and say that they are going to devalue their currencies so as to make the outstanding debt less of a burden cause that would really spook the mkts.

      Furthermore, they all want to get more debt on the books FIRST... before the inflation boogeyman (the bond market) really starts to sound the alarm.

      It will only be by surreptitiously devaluing the purchasing power of money that might make the servicing of debt repayment more manageable for the govt. (but certainly not for the people)

      Relative devaluations won't work, (because that is seen as giving a trade advantage) so they (the OECD countries) all need to work in concert at this...which is exactly what they are doing.

      One thing is sure, the purchasing power of money must go down in order to make the payment of debt more possible.

      What is not certain is whether or not taxpayers will ever be able to support the new higher levels of debt... and to be honest, I have my doubts.

      Maybe just me, but I have to think that as standards of living fall, people might have to spend less.... and in a consumption based econmy, that might be bad. Duh

      Keep in mind that much of today's wealth (bonds, cash, most RE, most equities) will never be able to keep up in terms of real purchasing power that will be lost.

      It will only be a select few people in the work force that might be able to come close to maintaining purchasing power ....and that's only if we start to see some inflation in wages....but even these people will not keep up with the increasing cost of living... globally

      Of course, even these gains in wages(should they occur) keep up with real inflation, there will be higher marginal taxes as the govt takes a larger share.

      So govt wins twice. They take more out of taxpayer's pockets and they devalue a good portion of the people's existing assets in terms of purchasing power....all in order to make the debt more manageable.

      But to the extent we don't see the people able to keep up in terms of standard of living, the govt will never be able to finance it's new higher level of debt service through taxation because most wages just won't keep up with the real rate of inflation.

      So I think I see where this is going....

      Deficits might actually keep getting bigger.

      The USD will devalue more than the Chinese yuan revalues.

      And on a relative basis, physical gold and PM's are likely to out perform all other asset classes.

      And gold equities... with constant or growing production are likely to do even better.

      As to gold ETF's, I'd be cautious if they use the LBMA.
      Chinese govt advise gold buying โ€“ why? What is their plan?

      a comment at the link

      American capitalism has systemic risk build into it, add greed and fraud, equals collapse.

      If your gold is held at an LBMA bank, you may be just an unsecured creditor, as much as 50,000 tonnes of gold have been sold that do NOT exist. That is equivalent of all the gold reserves in the world that are yet to be mined โ€” or, put another way, 25 years of gold production.
      The LBMA is likely to be the next Madoff scandal, multiplied by 100 โ€” a $5 trillion fraud as opposed to a $50 billion fraud.

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