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  • musketeernumberone musketeernumberone May 11, 2010 7:43 PM Flag

    Must Read: Gold and the Global Economy

    From Running of the Bulls Blog

    http://runningofthebulls.typepad.com/toros_running_of_the_bull/

    *Euro Bailout Bullish for Gold, Bearish for the Euro

    ....I never understood the arguments of those who said the dollar was going to "collapse." Collapse against what? The euro? The yen? The pound? The yuan?...

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    • From the link:
      The actions of the EU are unequivocally bearish for the euro. German and French banks are large owners of Greek bonds. Debt
      - Greek debt - is being transferred from German and French banks to the German and French states as well as to the European Central Bank. This is what happened in the US and the UK. American and British bank liabilities were transferred directly from the banks to the state after the housing collapse.>>

      I'm not sure this is accurate in terms of Greek debt transfers from German and French banks to Germany and France and the ECB.

      If someone can confirm this, I'd like to know if true


      As to comparisons to how things might get done in Euroland vs here, I don't think we have enough detail yet.

      My impression was that this was not really a bailout package for Greece, nor could it be since it would set a precedent whereby the bigger debtors like Spain and Italy might think they could get similar treatment.

      No way would the German people sit still for that.

      One thing I have read (in terms of speculation) is that Greek debtholders would be forced to take haircuts unlike what our banks had to endure lol.

      The Fed paid our banks 100 cents on the $ for trash for God's sakes.

      No harsh medicine for our banks, oh no.

      I would also add that the EU has a bit of a hammer over the heads of these more indebted countries and that austerity measures are
      much more likely to be followed. JMO

      Do countries like Greece really have an option?

      I think they do, but that's not important.

      The deciding factor will be the Greek people once faced with the hard choices and for insight to that I'd only point to Ireand.

      I was hoping they would reject the Euro and try and go it alone but the people were scared and felt trapped. Big mistake IMO,
      but that's beside the point.

      The important thing (I think) is that all these countries will rather stay with the Euro than risk going it alone and that means
      the austerity measures have a very good chance of being followed and given a few years, fiscal sanity should be once again within reach but no guarantees.

      Now contrast that with the US.

      cont'd

      • 1 Reply to winsabokk
      • Now contrast that with the US.


        Any chance of fiscal sanity here?

        Look at our Euro PIIG equivalents....
        i.e. the States.

        Then consider the political leanings of the most indebted states and how politics might interplay Federally.

        Think Obama will want to force Califoria to live within its means if the Dems want to have any chance in future elections?

        My guess is that much like the previous bailout, public sector workers in the states will be close to the top of the list in getting help.

        Heck, some are still getting raises!

        That's just politics ...as we now know it.

        So when you combine the fact that the US has global reserve currency status and you overay the nature of US politics, it's not hard to see that the US has a much longer rope to hang from and that it will be used for as long as possible.

        Meanwhile, the private sector in the US is probably everybit as devastated as in some of these other countries but the party
        continues a la Grecian formula within the US public sector.

        Life is sweet.

        And now the US has a healthcare sector that will be looking for it's share of Grecian type spoils.

        Is there any hope for things to not end up worse in the US than in Europe?

        My bet is the UK is going to come crashing down at some point and that might well be the last run to the dollar.

        And when push comes to shove, the UK will in all likelihood succomb to the same fate as Ireland.

        Personally, this is not what I
        would wish for as I detest governance of this type.

        If it were only a unified currency, I might be able to live with that but you just have to know that the elites behind these organizations
        have other plans.

        Bigger is always better for these folks since that confers more power and usually less accountabiliy to people at the local level.

        And once big, it's next to impossible to go back.

        Why do people fall for this stuff?

        Haven't we learned our lessons with too big to fail?

        Nothing like competition and the chance of failure to keep people on their toes and this applies to business as well as countries.

        I fear that we as humans are not prepared for what is coming in terms of governance.

        When we put of with the likes of the leaders we have, can we really be ready to experiment with something even bigger?

        Our politicians already act against the wishes of their constituents.

        Think how bad it might be if you were governed by people that had even less accoutability to the peoples wishes?

        like the European Commission.

        short videos give a taste of what the EC is all about

        http://www.youtube.com/watch?v=bypLwI5AQvY&feature=player_embedded

        http://www.youtube.com/watch?v=YWSYMpuCFaQ

    • I have had this guy on ignore since last year.

      How can he *worry about the mounting losses in (his) portfolio*, when he is busy worrying about mounting the donkey he keeps on the first floor?

    • You're waaaay too worried about me, karm. I'm doing fine. Contrary to you, I actually post my trades on this forum and contribute with ideas. You may find me negative, but I'm not here to placate clients or make friends, just offer folks a neutral outlook of the markets. What do you offer folks on this board, except your sheepish and predictable buy-and-hold PBR rhetoric everyday?

      My PBR short (in April) and long (in February) both made solid returns and were posted in real time on this forum. I made good money and have it all documented here. What about you? What do you have to show?

      Shouldn't you worry about the mounting losses in your portfolio? You see, pal, you come on this board everyday, filled with hot air, telling everybody how great your long-only portfolio is doing in a declining YTD market (which nobody here takes seriously).

      Start posting some real-time buy and sell orders with actual arguments and price targets, and maybe, just maybe, someone will give a hoot about what you have to say.

      I'm officially putting you on ignore, so don't bother coming back with more worthless banter. You're worthless to this board, and, especially, to me.

      Tata, loser.

    • phil I heard that the three stooges were talented but they died broke. I loved that skid "did you put the yeast, did you put the yeast . We all put the yeast".
      Anyway don't put too much into the three stooges think. I don't want you to spend time thinking and reevaluating yourself via via whether you are indeed one of the three stooges.

    • I think collapse means hyperinflation, so that you would buy a loaf of a bread for $50.00 and a pound of beef would cost $180. but I think that's not likely in the foreseeable future.It is mostly panic, the technicians are at work and would be doing the repairs. the economists on the other hand are in search of advanced new models to bring equilibrium to the markets.

    • It's all a difficult concept for me, to understand well the relationship between commodities and currencies, all the while currencies are changing values with other currencies. Too much relativity and not enough stability for my finite mind to comprehend.
      I think in the end the currency that wins is the currency that ends up with the perception that it is strong.
      In my view, that is the only reason that the dollar is rallying is the faith in the system. And gold is hitting new all time highs as the dollar is rallying and far from it's lows. So perception is everything. The fear factor is driving gold, while Euro weakness is driving the US dollar.
      Not sure where it's all going, but when this deflationary cycle comes to an end, it appears that inflation will certainly have it's turn.

      Here is the struggle:
      Governments fear deflation, while the subjects of the kingdom fear inflation... no ?

      • 1 Reply to rgneckow
      • Hey, RG: if it makes you feel any better, be aware that the currency part of international economics and investing is more complicated than rocket science.

        I would venture to say that the fact that there are so few billionaires among currency speculators is proof of the fact that the few who make it are lucky rather than good... that includes George Soros -- he only broke the Bank of England once. LOL

    • Musk, "the dollar is going to collapse" refers to the loss of its purchasing power; namely, its predictable debasement.

      Say today, a loaf of bread costs $1 in the US and 1 euro in Italy. Say 5 years from now, a loaf of bread costs US$ 10 in the US and 20 euros in Italy. Does that make the US a strong currency in the 5-year period? Of course not. It just means the euro managed to suck even more. But, forget the inter-currency relationships. From the a purchasing power point of view, both currencies are getting destroyed.

      The reason is that average wages are likely not rising at the same pace in the US and Europe and, thus, the population's standard of living (which is what really matters at the end of the day) is getting eroded both in the US and in Europe. Gold reflects that and, thus, will continue to march higher.

      • 3 Replies to phil_fgv
      • idiot phil do you ever have anything upbeat and dynamic to say?
        shit you are always complaining and talking negative.

      • In the context of the essay, *collapse* means collapse vs. other currencies, alternatives to the dollar. There will be no collapse in the near term...

        As the medium for international settlements and the benchmark from pricing most global commodities, the dollar enjoys a status that differentiates it from other currencies. This position is subject to ebbs and flows in the short term but weakening in the LT as other economies take a bigger share of global GDP.

        The erosion of real dollar value, i.e., purchasing power, takes its toll over time so that the apple that cost a nickel 50 years ago costs 10x that today. This inflationary process is distinct from, but related to, the fluctuation of exchange rates.

        Currency values and exchange rates are based on supply and demand as mediated by many factor including: relative interest rates, inflation rates, economic growth rates, labor productivity, risk tolerance.

        Gold is a psychological store of value and a commodity subject to the laws of supply and demand. It will never again be the value underlying currency... There has been too much financial innovation. The only reason to own gold as an investment is that the price is rising -- it pays no interest, it is not very important for industrial activity, it costs money to hold ...

 
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