The reality of impending economic collapse

[carloslebaron]

TMS, since you obviously know your isht and are apparently watching the commodities market like a hawk let me ask you this, if the price of gold is goinging through the roof why isn't the American dollar value also going through the roof, thus making it stronger? After all, it's base value is supposedly based on the value of the gold in Ft. Knox? I understand that there are more dollars being made than are being destroyed thus weakening its value, but money isn't worth anything if the commodity it's based off of isn't worth anything, in this case gold, and the price of gold is up up up, so the value of the dollar should also be up up up.

Oh and I was wondering, if the price of gold is rising, does this mean my gold dollar coins are worth more than a dollar? Everytime I get a haircut and give my guy a tip he gives me a gold dollar coin, I must have like 20 or 30 of these damn things and I refuse to use them.

I think that not only the US dollar but that most of the monetary currencies of the world are backed up with gold...

[themadscientist]

TMS, since you obviously know your isht and are apparently watching the commodities market like a hawk let me ask you this, if the price of gold is goinging through the roof why isn't the American dollar value also going through the roof, thus making it stronger? After all, it's base value is supposedly based on the value of the gold in Ft. Knox? .

That's incorrect. We have not been on a gold standard since 1972. The gold that is supposedly in Ft. Knox is simply that, if it's there, a pile of gold. The Implied value of a dollar is only tied to gold reserves in that a country in debt that held a substantial gold reserve would give later investors, which is what a bond is, confidence. The Confidence in the dollar is what gives it its ascribed value and a reserve of gold would contribute to that, but is not directly tied in.

I understand that there are more dollars being made than are being destroyed thus weakening its value, but money isn't worth anything if the commodity it's based off of isn't worth anything, in this case gold, and the price of gold is up up up, so the value of the dollar should also be up up up.

Oh and I was wondering, if the price of gold is rising, does this mean my gold dollar coins are worth more than a dollar? Everytime I get a haircut and give my guy a tip he gives me a gold dollar coin, I must have like 20 or 30 of these damn things and I refuse to use them.

The first theory regarding the driver of worth is spot on, but you have applied it to the wrong commodity, gold. The value of the dollar is based upon a commodity, but the commodity is confidence. The dollar is a promise and promises fulfilled increase its value, promises broken decrease it. In this way an intangible idea is actually created and destroyed much like a physical asset.

Those coins are only "golden." To understand the difference try to swap 50 of these



For one of these

[themadscientist]

I think that not only the US dollar but that most of the monetary currencies of the world are backed up with gold...

Countries have gold reserves, but their currencies are not pegged to them.

There is a difference between a country that has currency and gold reserves and one that has them and employs a gold standard. I believe Switzerland was the last to abolish a gold-based currency valuation model. In that case, the Swiss franc required a reserve of gold equivalent to 40% of circulating currency. If they wanted to "pump money into the economy" (heard that quite a bit haven't you?) They would have to match that with an equivalent aquisition of gold bullion.

There are many arguments against a commodity standard, gold, silver, oil and I agree with a few of them. In the above example, it's easy to see how difficult it would be to use government stimulus to jump start the economy. I'm no Keynsian, but I think carefully targeted government spending can breathe life into an economy. With a gold standard, fiscal policy takes on the handling and acceleration characteristics of an 18 wheeler with 17 flat tires.

It's ironic, though, that countries moved away from a gold standard just to adopt a dollar standard.

Many currencies were and are still, however, pegged to the dollar. Interesting state of affairs. At the time American prosperity was a sure bet. Those days are past, though, and countries are increasingly starting to take on the mindset of individual investors and look for ways to diversify their portfolios. The Euro would love to compete and China and Russia are actively talking about alternatives like a basket of currencies, an idea that may inject some stability IMO. The dollar as the world's reserve currency is how we have weathered past financial difficulties and continued to find ready buyers for our debt notes, but that paradigm is faltering and fading away.

[Chaotic_Warlord]

Then what is the point of having gold reserves? Im just curious, why have gold reserves if they aren't used for anything?

[themadscientist]

Collateral.

[Chaotic_Warlord]

Isn't that what the white house is for?

[BusyBadger]

Collateral.

Isn't that what the white house is for?

No, that's collateral damage.

[themadscientist]

No, it's like someone wants to borrow money from you and they have no debt and have been prosperous in the past. Then they come back later for more and they still owe you, but they are still doing well so you are ok with it. Now they come back for more, you are thinking about all that money they still owe you from last time and they are looking pretty dishevled and twitchy like they are on meth. You are going to start looking around their house for stuff they can sell to pay you back and you see they have a lot of jewelry and a big TV. You are nervous, but you see a possible alternate revenue stream when they pawn their stuff.

Default is not an option. The debt ceiling must be raised at least once more. Even if the federal government saw the light, which they haven't, and began serious fiscal discipline, the momentum is still to slow down. It is going to take many years of real budgets that completely eliminate deficits, reduce our national debt, and restore confidence. We are not past the point of no return yet, but the off ramp for the last exit is beginning.

Picture the last guy in the aforementioned scenario coming to you and apologizing for his past excess, a copy of Dave Ramsey's Total Money Makeover under his arm, and him saying "I have a lot of work to do, but I'm turning my finances around." You might be inclined to give him a chance and root for his return to financial security. I don't think the rest of the world wishes us ruin, but they can't pretend our economy is sustainable like our politicians do. They stand to get hurt and are trying to get out of the way of this collapsing pile of lies and empty promises before it topples under its own weight.



Welcome to Costco, I love you.

[carloslebaron]

Still, regardless of your excellent results with financial success, there is not a unique formula to break the mediocre's barrier. I know a dude who was a government housing inspector, he was fired due to lack of government funds at one moment, and as he was not a permanent employee he received his money for the few years of service. At that time, the price of houses was almost with no variations, and he used the money to buy some old buildings in very bad shape. He found a way to finance their repairs and after 6 months some of them were almost completed. The price of houses suddenly started to get inflated and he sold the complete houses and repaired the other ones. Finally, he sold the rest of the houses and he was practically rich in less than two years. Still, being rich, he applied again to the job vacancy as an inspector in the same government agency...and he got the job, at this time as a permanent employee.

I saw him from time to time, always with a new Mercedes Benz of the year, right now, I saw him again today driving a new Mercedes Benz SUV. He is a retired dude now, always very decent, nice, humble, with a smile in his face. He was lucky, and I think that like him, there are many whom without a formula but doing a financial movement at the right time and place, they have got rich from one day to another. I think that regardless of the economy fluctuation of the moment, it is "good luck" another key factor when investments are made.

[themadscientist]

I don't beleive in luck. I make my own opportunities. There are many roads to success; I agree completely.

If tomorrow there was a shortage of Jello pudding and people were scrambling for it I would be on the scene, sweater clad and doing my best Bill Cosby impersonation with a truck filled with overpriced pudding.

I think we agree that sitting on one's a** and waiting for our benevolent caretakers in government to elevate our status, nay, to ensure our mere survival is a bad bet.

I'm not talking here about the economy "fluctuating." I assert and my suggestions herein are based on the likelihood of full systemic meltdown. In that eventuality all systems are thrown out of alignment and only those with critical thinking skills who can adapt to new realities and leverage them effectively will survive and/or profit. Your freind was not lucky. He had the aforementioned skill to look past his situation, see an opportunity, and make it happen. That is the application of formula not luck and people like he are hated by those who wallow aimlessly in their situation thinking life owes them something.

Some may get "lucky," but I think if you cruise through metropolitan Detroit right now you will see an indicator of how many people score using that financial strategy.

[themadscientist]

woohoo, dead cat bounce! Heading full tilt boogie towards $33. Buying opportunity right thar!

[themadscientist]

As Washington continues to play chicken with the debt limit gold soars.
http://www.kitco.com/reports/KitcoNews2 ... JW_pm.html

Comex Gold Hits a New High Above $1,600.00, Silver Above $40.00, on Safe-Haven Demand

http://www.foxbusiness.com/markets/2011 ... r/?test=MM

Gold Flies Above $1,600 as Default Anxiety Persists

I believe the debt limit will be raised. When this happens this should deflate this bubble somewhat. Exactly how much I am unprepared to guess at, but the assertions that this is fear-based buying are fair. These latecomers to the market have very tenuous fear and should exit as quickly as they entered as soon as the current "crisis" abates. This should drive the rice down. That's a buying opportunity for people who have vision beyond next week.

[Encryptshun]

is amused.

[JoeCool6972]

As a person who practically lives from paycheck to paycheck, is a renter and has no savings, I really can't see any impact it will have on me or pretty much anyone I know very well (with very few exceptions).

I will continue to work day-to-day and take out quarterly estimated taxes and work in all kinds of different fields; moving to another area if needed. Lesson learned, specialization is death. Be a renaissance man.

Sad thing is, the economy WILL effect people like you and I more than anyone. It will have no negative effect on the rich.

[carloslebaron]

That's incorrect. We have not been on a gold standard since 1972. The gold that is supposedly in Ft. Knox is simply that, if it's there, a pile of gold. The Implied value of a dollar is only tied to gold reserves in that a country in debt that held a substantial gold reserve would give later investors, which is what a bond is, confidence. The Confidence in the dollar is what gives it its ascribed value and a reserve of gold would contribute to that, but is not directly tied in.

...The first theory regarding the driver of worth is spot on, but you have applied it to the wrong commodity, gold. The value of the dollar is based upon a commodity, but the commodity is confidence. The dollar is a promise and promises fulfilled increase its value, promises broken decrease it. In this way an intangible idea is actually created and destroyed much like a physical asset.

I was reading the script made of the dialogue between Ron Paul and Alvarez. Ron Paul asked about the reserves of gold, and the response was that the gold was deposited in 1934, and that one oz. of gold was 42 dollars, to the question from Ron Paul about any change about this value of exchange, the answer was that sitll is the same. Ron Paul asked about the current amount of gold backing up the dollar, and even mentioned about an audit to the Federal reserve to find out what is going on.

Looking around I found the following pictures, and I laughed a lot, about how smart is the move to cover up the dollar when it lacks of its correspondent collateral in gold, silver or any other valuable standard. I guess that the words "gold" and "silver" backing up the bill were erased in order to avoid someone to suit in court a case of fraud, because if today the new bills claim to have a correspondent value in gold or silver, and in reality they are not, then that is fraud. So, the solution was to remove such words mentioning a back up with gold or silver.

The picture shows the bill having a back up with gold. (No need to translate the words back to English, because the person who wrote them is translating what the bill says in English.)



The picture shows the new bill as unuseful because is just a piece of paper full of promises, no real value. (That is what the words say when pointing with the arrow: No Back up. "Unuseful paper")



The picture shows the former dollar bill, claiming to have its back up value with silver.



By the way, recently, China, Russia, Thailand, etc, are countries which are increasing their gold reserves at high rates. Something fishy is going here, when the dollar is found giving credibility by confidence alone on its value, and that its value is inknown because has not back up neither with gold, silver, diamonds, oil, or whatever.

I better make my own money, because after all, some cities are doing it in US, and my money will be backed up with confidence alone as well.

So, please, make a line, and wait for your turn, I will exchange the carloslebaron bills for gold only, one carloslebaron bill per ounce of gold. You will receive the correspondent ceertificate of complete idiot (your picture included in it to avoid scams), like idiots are the ones who still accepting in the international trade a currency that lacks of real value.

What a world we live in....

[themadscientist]

Yes, the silver and gold certificate notes were phased out. I still have a few. If you want your mind blown check this out. http://www.john-f-kennedy.net/thefederalreserve.htm

[carloslebaron]

Yes, the silver and gold certificate notes were phased out. I still have a few. If you want your mind blown check this out. http://www.john-f-kennedy.net/thefederalreserve.htm

Very good research, but the suggested solution of "informing"to your representative about the FED, such is really laughable, because our representativers are no more than puppets of the bank leaders who own the FED.

A similar situation was found in many countries around the world in the past, where a small group of banks owned the entire country, to the point of hurting the poor, the elder, and the low income families. So, the military took control, expelling the puppet elected leaders (read president, members of congress, etc) and creating a temporary military government. Notice that the first action of these military governments was to take control of the banks, making them part of the State.

Of course, many countries, Unites States as the leader, made boicots, cut off loans, etc, to these military governments, but, at the end, these countries survived very well, and -of course- a new group of people -the ones in power- got corrupted as well, and these countries started to get in debt again. At least, great part of the former debt was erased, and the banks didn't lose much anyway, because they did tens of times the value of the debts already charging interest for years.

Now, for to do what those military governments did agaisnt the banks, you must have to have guts, something that several other countries don't have, and will prefer to rise their debt to please their masters.

[themadscientist]

Debt limit compromise reached. Watch the PM costs drop. If you were thinking about entering the market wait until the impending drop bottoms out.

[themadscientist]

Dam, target fixation. S&P comes out of left field with a credit downgrade.

s-p-downgrads-u-s-debt-t539161.html

Time's up. The slide into ruin just became significantly steeper. You better find a store open on sunday and stock up on the yellow stuff before the Asian markets open sunday night EST. It's not going to be pretty and the direction is and shall be UP!

[Eikon]

Who cares about the S&P rating downgrade. Doesn't matter.

These are the same mouth-breathers who gave sub-prime mortgage backed securities AAA ratings 5 years ago. They are simply private companies who earn their income by giving out opinions to investors and analysts. Given their history, I'd say most investors will know better and not think the sky is falling.

It's only news because the "news" is making it news.

The sky is not falling, the market will not collapse, you don't need to go out and stock up on canned foods.

[RCA]

Who cares about the S&P rating downgrade. Doesn't matter.

It does matter. If the markets don't react and nothing changes then you are right. But they won't and it will be a s*** storm.

These are the same mouth-breathers who gave sub-prime mortgage backed securities AAA ratings 5 years ago. They are simply private companies who earn their income by giving out opinions to investors and analysts. Given their history, I'd say most investors will know better and not think the sky is falling.

You're right, but they f*** up and are not letting it happen again. They are doing their jobs and the US's rating should be lower.

[Chaotic_Warlord]

I so wish I had a bit of disposable income right now, I've looked for a prime time to get into the stock market and now is definitely a prime time. Buy low, sell high right. If you buy in now and just hold onto those stocks for a year or so and you stand a good chance to make out like gangbusters when the economy turns back around. Being that next year is an election year don't be surprised if the Rebublicans start to make a big push to fix the financial market to get a republican back in office.

[rc1honda]

http://finance.yahoo.com/news/China-fla ... 2.html?x=0

Well the ish just hit the fan. China says it will no longer borrow to the US. Also, the Chinese are calling for a new standard currency that's more stable.

Now i don't know if most people know this, but that statement it pretty much a act of war. If the US dollar is no longer the standard currency, the money in every Americans pockets wont be worth the paper it printed on literally.

If the standard currency is no longer the dollar, oil will no longer be traded in dollars and gas prices will go to 10 or 15 if not more dollars a gallon. The start of the economic and social collapse of American infrastructure. If the standard currency changes, life as American will change drastically in the span of 24 hours.

I don't think most people know the gravity of the this situation. For the US as a nation to continue as has the imperative for the US dollar to remain the standard currency.

[Eikon]

http://finance.yahoo.com/news/China-fla ... 2.html?x=0

Well the ish just hit the fan. China says it will no longer borrow to the US. Also, the Chinese are calling for a new standard currency that's more stable.

Now i don't know if most people know this, but that statement it pretty much a act of war. If the US dollar is no longer the standard currency, the money in every Americans pockets wont be worth the paper it printed on literally.

If the standard currency is no longer the dollar, oil will no longer be traded in dollars and gas prices will go to 10 or 15 if not more dollars a gallon. The start of the economic and social collapse of American infrastructure. If the standard currency changes, life as American will change drastically in the span of 24 hours.

I don't think most people know the gravity of the this situation. For the US as a nation to continue as has the imperative for the US dollar to remain the standard currency.

I guess I should just go jump off a bridge then.. life is over.. wah wah..

You are far over-reacting! Go back and do your homework and settle down.

The only impact I can see from S&P's downgrade is slightly higher mortgage rates coming in the next few months. Gas prices are coming down and the base currency of trade will not likely change, and even if it does, it won't make a huge difference.

[Eikon]

Who cares about the S&P rating downgrade. Doesn't matter.

It does matter. If the markets don't react and nothing changes then you are right. But they won't and it will be a s*** storm.

These are the same mouth-breathers who gave sub-prime mortgage backed securities AAA ratings 5 years ago. They are simply private companies who earn their income by giving out opinions to investors and analysts. Given their history, I'd say most investors will know better and not think the sky is falling.

You're right, but they f***ed up and are not letting it happen again. They are doing their jobs and the US's rating should be lower.

The market had it's reaction on Thursday when the news leaked to the market and it sold off 400 points.
Now that the common investors have heard the news, you may see another 200 to 300 points let off in a couple days. But I don't expect much to happen.

[RCA]

The market had it's reaction on Thursday when the news leaked to the market and it sold off 400 points. Now that the common investors have heard the news, you may see another 200 to 300 points let off in a couple days. But I don't expect much to happen.

What happened Thursday and Friday was Europe, but I hope you're right.

[themadscientist]

Eikon, you are exhibiting the behavior I have alluded to time and again, the person who refuses to look at the factual indicators and appreciate what they are telling you because you refuse to acknowledge the party is over. Every system degrades, even a perfectly-maintained one. Would you respond to a rod knock by saying "my engine has always run?"

The American government's stewardship of the nation's finances is very much not that exemplary system either. They have become the national equivalent of someone with 27 credit cards with successively higher interests rates, paying of one card with another, barely making the minimum payments, never taking a bite out of the principle, and continuing to run up more charges.

I love ya man, but on just about everything you have said above you are completely and demonstrably wrong. To suggest that the downgrade of our credit rating and the movement away from the dollar as the worlds reserve currency is not a critical event is ignorant on its very face.

[rc1honda]

http://finance.yahoo.com/news/China-fla ... 2.html?x=0

Well the ish just hit the fan. China says it will no longer borrow to the US. Also, the Chinese are calling for a new standard currency that's more stable.

Now i don't know if most people know this, but that statement it pretty much a act of war. If the US dollar is no longer the standard currency, the money in every Americans pockets wont be worth the paper it printed on literally.

If the standard currency is no longer the dollar, oil will no longer be traded in dollars and gas prices will go to 10 or 15 if not more dollars a gallon. The start of the economic and social collapse of American infrastructure. If the standard currency changes, life as American will change drastically in the span of 24 hours.

I don't think most people know the gravity of the this situation. For the US as a nation to continue as has the imperative for the US dollar to remain the standard currency.

I guess I should just go jump off a bridge then.. life is over.. wah wah..

You are far over-reacting! Go back and do your homework and settle down.

The only impact I can see from S&P's downgrade is slightly higher mortgage rates coming in the next few months. Gas prices are coming down and the base currency of trade will not likely change, and even if it does, it won't make a huge difference.

Dude I really don't think you read my post. It has nothing to do with the stupid downgrade of credit rating. It had to do with the thing the most important commodity in the world is traded with, oil, and the American dollar.

If foreign nations decide to band together to create a new Standard Currency, or in other words the currency in which oil is traded in the nation will have a drastic change over night.

Now i am not saying it's going to happen, but the Chinese making threats that it will happen is in fact a huge deal and not one to take lightly. They are saying "fix the issues with the American dollar or we will".

I have done my homework extensively on this issue. And if Standard Currency changes to another fiat or commodity based currency it will spell the end of American economic and political dominance throughout the world.

Your talking about gas prices on mortgages. If the Standard Currency changes, gas will become a thing for the rich at 20 and 30 dollars a gallon. And mortgages will be almost non existent for the average American to secure any finances. At least for the first 5 years until we restructure. Not to mention, food, gas, electric, utilities or anything that is tied to the price of oil.

Now you told me i need to do my homework. Search for you own credible sources to find out hat will happen to our country if the Standard Currency changes. What exactly do think gave the FED the power to just print money whenever we needed it? I

[themadscientist]

Ah, the teacher becomes the student

[Eikon]

I guess if we are studying the art of unfounded speculation and over-reaction, then sure.. I've been schooled.