America will face Riots, Marches, and Revolution

[Ryan Ruck]

Grain prices (among a couple other food stock commodities) have spiked upwards to their trading limits the last couple trading sessions. This upward spike in prices of these items is going to translate into higher prices for almost everything they are used in from bread (for obvious reasons) to meat because of the higher price of the corn used for feed.

I can attest personally to rising food prices. Last week I went shopping at the local Sam's Club to pick up a couple things. I hadn't been shopping there for about 2 months or so. The price on a mozzarella cheese loaf has gone from ~$9 to ~$11. Price of a 10lb. bag of chicken wings has gone from ~$14 to ~$19. The prices on most things haven't gone up that dramatically or at all but those were the two most noticeable things I've seen.

[American Patriot]

I've noted the prices of food increasing.

My wife and I (and the kids) used to do a once-per-month grocery run. The last time that happened was almost three years ago. It was a two or three shopping cart run at the commissary. We bought enough food to fill out supplies as well as to stock for the month. Once a year, half a cow went in the freezer. After the last kids moved out (and back in and back out again, about three years ago) we stopped the monthly run.

In those days we spent 500 bucks a month (feeding five kids and or any number of people in the house from 7 to 12 at any given time - counting the later-on grand kids). Over time most of them have moved away (I have one back temporarily, he has his own business but it's closing at the end of the month and he and his partner and room mate of many years have split.)

So - wife and the one son hit the commissary last week. 150 bucks for the three of us for around three weeks worth of stuff, plus some restocking we've neglected over the past three years.

Over the course of time I have usually been the one hitting the store to the tune of about 75 bucks a week for just wife and I - including the necessities like beer (when I'm not making it) and soda and other things like snacks.

We keep a LOT of beans and rice in the house along with cooking oil - just in case, but we eat that stuff too. I probably have a 150 pounds of beans and 150 of rice....

and canned meat. (And there are squirrels in the area... lol)

[vector7]

The Coming Middle-Class Anarchy

Submitted by Gonzalo Lira

True story: A retired couple I know, Brian and Ilsa, own a home in the Southwest. It’s a pretty house, right on the manicured golf course of their gated community (they’re crazy about golf).



The only problem is, they bought the house near the top of the market in 2005, and now find themselves underwater.

They’ve never missed a mortgage payment—Brian and Ilsa are the kind upright, not to say uptight 60-ish white semi-upper-middle-class couple who follow every rule, fill out every form, comply with every norm. In short, they are the backbone of America.

Even after the Global Financial Crisis had seriously hurt their retirement nest egg—and therefore their monthly income—and even fully aware that they would probably not live to see their house regain the value it has lost since they bought it, they kept up the mortgage payments. The idea of them strategically defaulting is as absurd as them sprouting wings.

When HAMP—the Home Affordable Modification Program—was unveiled, they applied, because they qualified: Every single one of the conditions applied to them, so there was no question that they would be approved—at least in theory.


Applying for HAMP was quite a struggle: Go here, go there, talk to this person, that person, et cetera, et cetera, et cetera. “It’s like they didn’t want us to qualify,” Ilsa told me, as she recounted their mind-numbing travails.

It was a months-long struggle—but finally, they were approved for HAMP: Their mortgage period was extended, and the interest rate was lowered. Even though their home was still underwater, and even though they still owed the same principal to their bank, Brian and Ilsa were very happy: Their mortgage payments had gone down by 40%. This was equivalent to about 15% of their retirement income. So of course they were happy.

However, three months later, out of the blue, they got a letter from their bank, Wells Fargo: It said that, after further review, Brian and Ilsa had in fact not qualified for HAMP. Therefore, their mortgage would go back to the old rate. Not only that, they now owed the difference for the three months when they had paid the lowered mortgage—and to add insult to injury, they were assessed a “penalty for non-payment”.

Brian and Ilsa were furious—a fury which soon turned to dour depression: They tried contacting Wells Fargo, to straighten this out. Of course, they were given the run-around once again.

They kept insisting that they qualified—they qualified! But of course, that didn’t help at all—like a football, they were punted around the inner working of the Mortgage Mess, with no answers and no accountability.

Finally, exhausted, Brian and Ilsa sat down, looked at the last letter—which had no signature, and no contact name or number—and wondered what to do.

On television, the news was talking about “robo-signatures” and “foreclosure mills”, and rank illegalities—illegalities which it seemed everyone was getting away with. To top it off, foreclosures have been suspended by the largest of the banks for 90 days—which to Brian and Ilsa meant that people who weren’t paying their mortgages got to live rent free for another quarter, while they were being squeezed out of a stimulus program that had been designed—tailor made—precisely for them.

Brian and Ilsa are salt-of-the-earth people: They put four kids through college, they always paid their taxes. The last time Brian broke the law was in 1998: An illegal U-turn on a suburban street.

“We’ve done everything right, we’ve always paid on time, and this program is supposed to help us,” said Brian. “We follow the rules—but people who bought homes they couldn’t afford get to squat in those McMansions rent free. It would have been smarter if we’d been crooks.”

Now, up to this point, this is just another sob story of the Mortgage Mess—and as sob stories go, up to this point, it’s no big deal.

But here’s where the story gets ominous—here’s where the Jaws soundtrack kicks in:

Brian and Ilsa—the nice upper-middle-class retired couple, who always follow the rules, and never ever break the law—who don’t even cheat on their golf scores—even when they’re playing alone (“Because if you cheat at golf, you’re only cheating yourself”)—have decided to give their bank the middle finger.

They have essentially said, ****it.

They haven’t defaulted—not yet. They’re paying the lower mortgage rate. That they’re making payments is because of Brian: He is insisting that they pay something—Ilsa is of the opinion that they should forget about paying the mortgage at all.

“We follow the rules, and look where that’s gotten us?” she says, furious and depressed. “Nowhere. They run us around, like lab rats in a cage. This HAMP business was supposed to help us. I bet the bank went along with the program for three months, so that they could tell the government that they had complied—and when the government got off their backs, they turned around and raised the mortgage back up again!”

“And charged us a penalty,” Brian chimes in. The non-payment penalty was only $84—but it might as well been $84 million, for all the outrage they feel. “A penalty for non-payment!”

Nevertheless, Brian is insisting that they continue paying the mortgage—albeit the lower monthly payment—because he’s still under the atavistic sway of his law-abiding-ness.

But Ilsa is quietly, constantly insisting that they stop paying the mortgage altogether: “Everybody else is doing it—so why shouldn’t we?”

A terrible sentence, when a law-abiding citizen speaks it: Everybody else is doing it—so why don’t we?

I’m like Wayne Gretsky: I don’t concern myself with where the puck has been—I look for where the puck is going to be.

Right now, people are having a little hissy-fit over the robo-signing scandal, and the double-booking scandal (where the same mortgage was signed over to two different bonds), and the little fights between junior tranches and senior tranches and the servicer, in the MBS mess.

But none of that **** is important.

What’s really important is Brian and Ilsa: What’s really important is that law-abiding middle-class citizens are deciding that playing by the rules is nothing but a sucker’s game.

Just like the poker player who’s been fleeced by all the other players, and gets one mean attitude once he finally wakes up to the con? I’m betting that more and more of the solid American middle-class will begin saying what Brian and Ilsa said: ****it.

**** the rules. **** playing the game the banksters want you to play. **** being the good citizen. **** filling out every form, **** paying every tax. **** the government, **** the banks who own them. **** the free-loaders, living rent-free while we pay. **** the legal process, a game which only works if you’ve got the money to pay for the parasite lawyers. **** being a chump. **** being a stooge. **** trying to do the right thing—what good does that get you? What good is coming your way?

****it.

When the backbone of a country starts thinking that laws and rules are not worth following, it’s just a hop, skip and a jump to anarchy.

TV has given us the illusion that anarchy is people rioting in the streets, smashing car windows and looting every store in sight. But there’s also the polite, quiet, far deadlier anarchy of the core citizenry—the upright citizenry—throwing in the towel and deciding it’s just not worth it anymore.

If a big enough proportion of the populace—not even a majority, just a largish chunk—decides that it’s just not worth following the rules anymore, then that society’s days are numbered: Not even a police-state with an armed Marine at every corner with Shoot-to-Kill orders can stop such middle-class anarchy.

Brian and Ilsa are such anarchists—grey-haired, well-dressed, golf-loving, well-to-do, exceedingly polite anarchists: But anarchists nevertheless. They are not important, or powerful, or influential: They are average—that’s why they’re so deadly: Their numbers are millions. And they are slowly, painfully coming to the conclusion that it’s just not worth it anymore.

Once enough of these J. Crew Anarchists decide they no longer give a ****, it’s over for America—because they are America.


Update I:

The Center for Public Integrity has a story, written by Michael Hudson this past August 6, that shines a light on the issue of perverse incentives of the HAMP program. These perverse incentives came to light because of a whistleblower, a former employee of Fannie Mae, filing a lawsuit. Fannie Mae was so keen on being perceived as a money-maker, after the Federal government bailout, that the aid programs passed by the Congress and signed by the President were turned into profit centers.

The former executive, Caroline Herron, recounts:

“It appeared that Fannie Mae officers were focused on maximizing incentive payments available to Fannie Mae under various federal programs – even if this meant wasting taxpayer money and delaying the implementation of high-priority Treasury programs,” she claims in the lawsuit.

Herron alleges that Fannie Mae officials terminated her $200-an-hour consulting work in January because she raised questions about how it was administering the federal government’s push to help homeowners avoid foreclosure, known as the Home Affordable Modification Program, or HAMP.

Herron further alleged that “trial mods” were implemented regardless of eligibility of applicants, so that Fannie Mae would be eligible for Federal government bonuses.

Ms. Herron’s testimony in fact proves Ilsa’s suspicion that there was a scam at bottom. As Mr. Hudson writes, “Herron charges that Fannie Mae continued in headlong pursuit of ‘trial mods’ even though it knew that many had little chance of becoming permanent. [. . .] Fannie preferred doing trials, Herron alleges, because it was eligible to receive incentive payments from the Treasury Department.”

So in the pursuit of these perverse incentives, people who did not qualify for HAMP were enrolled in the program. And when their “trial mods” were up after 90 days, they would be notified that they didn’t qualify—regardless of whether they in fact did qualify, as in the case of Brian and Ilsa.

All so as to be perceived as a profitable operation, worth having been bailed out. All so as to be perceived as “returning America’s money”.

As of February, 2010, of the over one million homeowners’ mortgages under HAMP auspices, 83% were “trial mods”. One would assume that those 850,000 homeowners would also be assessed an $84 penalty for non-payment.

$84 times over 850,000? You do the math.

[Aplomb]

Hmmm. How can all of these food prices go up when we have nice underpaid migrant workers doing the work that Americans don't want to do???

[vector7]

Where will our food come from if American food production shuts down?

By John Hochstetler, Guest Writer Food production in America is fast shutting down.

Where will our food come from?

We are seeing a rapid decline in America's ability to feed itself. America is fast becoming a nation where food production is not sustainable in the long term. You won't hear it from the farm state politicians, or anyone running for office because it's a matter they don't want to address.

Unless steps are taken, lack of food may soon hit the American population. Your bag of gold is useless at Kroger if there is nothing on the shelves.

Government involvement has a long history of damaging anything it touches. Good ideas generally go bad when government gets involved. Consider for example that corn is the largest crop grown in America. Last year, 45 percent of the nation's corn crop went straight to your gas tank in the form of ethanol. This year it will be more. It's happening because the government requires it and may soon even require more.

The Environmental Protection Agency is in the process of approving raising the ethanol content in your gasoline from 10 to 15 percent. The message is clear. Our politicians would rather have us less dependent of foreign oil, but more dependent on foreign food. Does this make sense? Which is more important to you?

William Bailey, director of the school of agriculture at Western Illinois University, said recently that the livestock industry may soon follow textiles, electronics, furniture, and home appliances and soon begin locating offshore.

Increasing government regulations and restrictions on where and how farmers may raise livestock. Environmental regulations, and the growing influence of animal welfare activists, all add costs and aggravation, reduce efficiency, and will shortly force animal production offshore, he says.

Consider Tyson Foods, the nation's giant in chicken production, or Cargill, the mega producer of pork, beef and turkey. It will take only one board meeting and the snap of the fingers to begin locating their facilities a mile south of the Rio Grande. No more President Barack Obama. No more animal rights activists. No more Gov. Jennifer Granholm, and no more Michigan Legislature pulling down the livestock industry. Gosh, did I mention jobs?

Do we consumers care where our meat is produced? Do we care where our vegetables are produced? How much do we value a safe food supply?

The time has come for Americans to take back our food supply. We have the choice to import our food from China and other countries or grow it ourselves. At this critical crossroad in American history, which direction will you vote? Do we continue importing our food from China --remember the cat and dog food issue -- and remember the tainted honey issue just a couple of weeks ago.

The choice is yours. Speak up to your elected representatives and candidates for office, or remain silent and enjoy your imported food. Our current course will not have a happy outcome.

[AGEUSAF]

Because the dollar is a piece of paper. If I have a real commodity that you need, you are gonna have to fork over a lot of pieces of paper or do something for me that is equal in order to make me happy. Something for nothing is about to end in this country.

[Ryan Ruck]

Yep. Gold ended up at almost $1380 today. It was about $100 lower less than a month ago!

[Malsua]

I just want to note something.

In the "Gold will be confiscated soon" thread. http://www.transasianaxis.com/vb/sho...9&postcount=11

I posted some charts explaining what was going on and the fact that we're about 5 seconds up stream from Niagara falls. The indicators of hyper inflation are going to be violent spikes in core commodities like Gold and Silver.

I posted this at FR:

Saturday, August 28, 2010 9:00:30 AM · 9 of 40
Malsua to GonzoII
So we just need to watch for a commodity spike and then you’ll know. You can beat everyone to the store and stock up.

I also added in the gold will be confiscated threat:"Essentially what will happen is that when big money cannot flee into Gold, it will move into other commodities. This will trigger real hyperinflation. It will be doomsday.

Make sure you have ammo on hand and several weeks worth of food.

Understand what is happening in this current run-up of gold.

1. Quantitative Easing 2(QE2) is probably going to happen. This is why the market is booming. It means more money for the vampire squids on Wall Street and they smell blood. All QE2 is is the Fed goes ahead and marks on their books that they have a debit...then they go out on the market and purchase stuff. It is no different than Zimbabwe style money printing except it's just a guy at a keyboard. Imagine if you could log into your bank account and add some zeros to your account Balance. The Fed can do this, indeed already has done this twice recently and they will do it again.

2. People know that the dollar is going to lose value and are buying commodities that will only appreciate in value as the dollar plummets.

3. While gold will always typically be worthwhile, it's not where the big value is to be gained. Gold and to some extent silver are played out. The big money needs some where safe to park reserves that can't be inflated away. They are moving into grains and oil. There are other commodities that will get hit after these stop being so attractive.

The Fed will see these commodity spikes and will read it entirely wrong. They will push for QE2(i.e. Printing money) but it won't work. Think of it like this. You're at a party, it's early in the evening, everyone is feeling good with a few drinks in 'em and the DJ plays "Celebrate". Free drinks on the house Everyone gets up, dances, woohoo, big fun, big fun. That was QE1.

An hour and a half later , no one is on the dance floor so the DJ plays Celebrate again and give free drinks. Wee, some people get up, but most are pretty buzzed and might in fact fall over if the dance now. This was QE1.5

Now it's QE2 time. It's 2am. Most of the people have either left or are trying to talk the 2am girl into going home with them. The DJ wants to rev it up "FREE DRINKS ON THE HOUSE!!" and plays Celebrate again. This time, one drunkard stumbles up, raises a glass and slurs out "I love you man" but everyone else left, is trying to get laid or is in the corner barfing from all the free booze.

Well, the DJ is the Fed, the party goers are the big banks, the booze is QE2 and you're the owner of the joint that has to pay for all the booze, clean up all the barf, drive the drunks home while fending off the 2am guy who's trying to get in your pants. He's very insistent and very gay. Oh yeah, I forgot, you used the last bit of money you had to host this party in the first place.

[American Patriot]

So really... I need to contact one of those "We buy houses for cash" guys... get what I can get for my home "as is" and walk away, right?

That's what everyone is saying.

[Malsua]

So really... I need to contact one of those "We buy houses for cash" guys... get what I can get for my home "as is" and walk away, right?

That's what everyone is saying.

I certainly wouldn't say that. Selling your largest single asset NOW for fiat dollars that are going to get inflated away probably isn't where I'd be with that.

If the dollar crashes, there will be some amazing bargains but they won't be payable with the crashed dollars. They'll be payable in the "New Dollar". Anyone holding old dollars is shit out of luck.

Furthermore, you have a place to live. Even if you lose your job, you will have a roof. The banks can't repossess every house at once.

[American Patriot]

They won't repossess mine at all. I'll shoot first. lol

They might get it, but they will pry that and my guns from my cold dead fingers.

[American Patriot]

I certainly wouldn't say that. Selling your largest single asset NOW for fiat dollars that are going to get inflated away probably isn't where I'd be with that.

If the dollar crashes, there will be some amazing bargains but they won't be payable with the crashed dollars. They'll be payable in the "New Dollar". Anyone holding old dollars is shit out of luck.

Furthermore, you have a place to live. Even if you lose your job, you will have a roof. The banks can't repossess every house at once.

Mal....

I think you and I aren't actually on the same page here, might not even be the same BOOK.

I don't CARE about a roof over my head. I CARE about being able to SELL the house.

My plans don't include owning a HOUSE any more. Only a boat.

So... here's my question then.

If all everyone is saying is coming to pass... now would be a better time to get rid of the house than later. Money is still money.

My money "in the bank" is still "there" and it was real money when I made it. That means any "crash" that comes will leave me SOMETHING...

Wouldn't it be better to sell the house with what I have now, have the money from it and buy what I NEED to outfit my boat (and the boat of course) and have THAT in my hands... NOW, rather than later?

See where I am going with this is way further than you or anyone else is thinking.

Everyone is thinking "The world is going to end tomorrow". And what's really going to happen is that some people cease to exist and the rest of us are still here.

We still have to live, survive, get by, eat, sleep and excrete. Regardless of what the market does or doesn't do.

Everyone with the doom and gloom about a crashing economy is simply helping to talk it down. This is NO HELP to America. This is no help to anyone. Every moron on Wall Street who spends their time talking DOWN the economy is hurting America by scaring people out of spending.

[Malsua]

Rick,

I understand what you're saying. I also understand where you're going.

I'm not convinced of the wisdom of such a systemic change in the face of certain uncertainty but it's your life.

Consider that at some point people will be willing to trade vast sums for food and basic necessities of life. Housing assets during that period will valued low. They will still have value, it's just going to be the Ebb. As society turns around from that and the basic needs are met, housing will rebound significantly. This begs the question...if I sell now, will I get more value than if I sell later? The answer is probably yes. That question however is missing perhaps a more fundamental question. Should I sell at all?

If you want to cash out and use fiat dollars to purchase other assets that you will use, it's probably a wise decision. If those assets cannot sustain you through a civil break of some sort the way your current assets can, it's not a wise decision. This is the core point I question.

As to gloom and doom, read the headlines. The stock market is booming. It's only the people that are watching indicators and FED behavior that are concerned. There is no sustained effort to talk down the market, if anything the talking heads are talking up the market.

I also agree that we have to get by, eat and sleep regardless of what the market does. The problem is the market can and does influence all of the above. When corn and wheat sky rocket because the fed is inflating deficits away, it hits you right where the food lands.

[American Patriot]

Rick,

I understand what you're saying. I also understand where you're going.

I'm not convinced of the wisdom of such a systemic change in the face of certain uncertainty but it's your life.

True, it is my life. I'm 53 years old. I've been in the service of the US Government for over thirty years. I'm tired of it. I'm actually tired of having people tell me what to do, when to do it, where to go, how to go, whether I can buy gas or not, or fish, or eat or sleep.

Freedom is not free and I've paid for it - and watched others pay for it.

I don't tell people what they can and can't do - unless it has something to do with a forum I help run. Other than that I don't care if they eat and sleep Anomalies and UFOs, rob a bank or go get bent.

On the other hand I, like you, have always tried to OFFER advice that is helpful.

At this point - I don't see that life is any different than it was in 1989-1990. The economy was in the garbage dump. I had left the US Military with promises by a company that were never kept. I lost my job because the person making the promises lied to me, and used me. When she didn't get her precious contract using my background and resume, I was fired as "incompetent".

I TRUSTED a woman who was sweet and polite on the phone and in person in interviews and because she said "We're a Christian Organization".

The bitch turned me out on the streets three days before Christmas. I spent the next 4 months selling most of my personal belongings, maning up and shoveling snow or cutting grass (yard work actually it was winter) for neighbors to make a few bucks to feed my kids.

I spent money I didnt have on credit cards - and I JUST paid that off... twenty years later - a few days ago.

I survived. I kept my house, I'm still in my house and I raised my kids and sent them off into life. That they left my home a wreak and haven't lifted a finger really do to much more than move in for lengthy periods of time over the past few years (and further break and destroy things without fixing them) I guess is of no consequence to anyone other than myself.

My rational for retirement is that I WANT to walk away from this crap, I want to take TIME OUT to smell the roses, go fishing and to enjoy what I HAVE managed to save over the years.

The "wisdom" therein is simple. I've had it with working my ass off, watching my friends die from cancer, heart attacks and getting run over by some asswipe who was too drunk to even find the ignition switch in the first place.

WAITING to SEE if the world is going to end is a past time I've outgrown. I don't give a shit if it ends, as long as I live through it. And I WILL LIVE THROUGH IT.

Survivalism is the science of preparing and knowing what to do in emergency situations. It's not always sitting around and waiting for the world to stop and then try to get by.

Consider that at some point people will be willing to trade vast sums for food and basic necessities of life. Housing assets during that period will valued low. They will still have value, it's just going to be the Ebb. As society turns around from that and the basic needs are met, housing will rebound significantly. This begs the question...if I sell now, will I get more value than if I sell later? The answer is probably yes. That question however is missing perhaps a more fundamental question. Should I sell at all?

I have considered this and I question it. People who own property will become targets if it gets as bad as you say (and others). You will be attacked and things will be taken from you if you're there. I don't want to HAVE to kill anyone. I will of course defend myself and my wife - but I don't want to be in that position again if I can help it.

If you want to cash out and use fiat dollars to purchase other assets that you will use, it's probably a wise decision. If those assets cannot sustain you through a civil break of some sort the way your current assets can, it's not a wise decision. This is the core point I question.

Unlike you and Vector and others, I QUESTION this "fiat dollar" nonsense because that's what it is to me.

ALL monies in ALL the world are "fiat dollars" or currency by definition. They can not be "converted into something else of value".... but honestly, if you guys look at this, that's NOT TRUE.

Sure, I can't go to the local "bank" and say "Give me my 100 dollars in gold coins ok?"

But I can take that 100 bucks out of the bank and go to a gold dealer and buy 100 dollars worth of gold. Thus I HAVE converted my money. Round about perhaps, but it has WORTH.

And yet, you, me and everyone else on this site uses MONEY. Amazing. We save it, we spend it, we go to work and are paid in it.

As to gloom and doom, read the headlines. The stock market is booming. It's only the people that are watching indicators and FED behavior that are concerned. There is no sustained effort to talk down the market, if anything the talking heads are talking up the market.

You know I do more than "read the headlines", right? I mean, you've known me a pretty long time and I don't take anyone's word for something unless they can give me proof or at least give me reasoning behind their beliefs.

Beliefs... another little issue with me. That you BELIEVE something is fine and dandy, until someone puts their eyes out.

Mark 9:47; And if thine eye offend thee, pluck it out: it is better for thee to enter into the kingdom of God with one eye, than having two eyes to be cast into hell fire:

Really? Beliefs cause our idiot neighbors in the Middle East to behead infidels. Beliefs in this country cause people do to really stupid things too. BELIEF that the world is about to end, come apart at the seams, the dollar will completely collapse is a BELIEF and a BELIEF only, not a fact.

The fact IS that MARKETS do not drive the dollar - the dollar AND the market are driven by need. I need something, you have something to sell, I buy it, you get a profit (hopefully).

That tells me that people will have a market... and sure it might be a black market, a barter market or a "fiat dollar" market - but as long as people need a roof over their heads they will find a way to keep the roof or "give up" and go on the dole.

The problem is just that, the DOLE. I won't get into my thinking there - but, the government is about to get it's first make over since Ronald Reagan.

It will get it's second one come 2012 when Obama is kicked out on the streets with his millions and his "Former Presus (or POTUS if you prefer) Status".

I also agree that we have to get by, eat and sleep regardless of what the market does. The problem is the market can and does influence all of the above. When corn and wheat sky rocket because the fed is inflating deficits away, it hits you right where the food lands.

This is actually the crux of both our arguments, for and against.

The MARKET is INFLUENCED by these things - not the other way around. The market is certainly large and all-encompassing though, and what happens with the DOW or NASDAQ or other markets can affect one another. On that I agree. I spent a LOT of time in college over the past few years with an eye to understanding the economics of the world, and both micro and macro.

I came away with little more understanding than I had before because it is so constantly changing and the world is very messy to live in. I can't be CERTAIN you are right and I am wrong or I am right and you're wrong.

It's THAT little tiny thing that says, "Do what you will Rick, because everyone else is going to as well. If you plan for retirement then retire because regardless of your lot in life, you can't ACCOMPLISH something you set out to do if you don't have a plan and stick to the plan...."

THAT right there is the driving force for me asking my ignorant questions and questioning the ignorance of the rest of the world.

[American Patriot]

I want to pose a question here., mostly directed at all these people who DIDN'T buy gold years ago who are buying it now....

In '73 gold was worth about 75 bucks an ounce.

About 1980 or so (Carter) it spiked at 800/oz.

From about 81 through the Reagan years, it dropped steadily to (with various spikes) to around 400 and remained there until around 95 when it plummeted again to under 300 bucks an oz.

Since then it has increased steadily with various fluctuations until it is sitting at about 1200 an oz. Pretty good. But in the last 7-8 years people have been screaming "BUY GOLD!"

And people have been doing it.

At 900, 1000, 1100 and now 1200 - until today while it is at 1375 per ounce.

This is all a gamble. Things increase and decrease in price all the time.

Yeah, I can see inflation in the numbers too - but at the same time I see a major issue with the amount of gold on the planet and it's purchase.

Everyone is buying gold, the price has gone up massively - BECAUSE PEOPLE WANT GOLD. Not because the dollar is failing.

Again, this is the MARKET. I want it, you want to sell it (or whatever) thus there is the law of supply and demand. As the demand goes up, so goes the price.

As the demand drops so drops the price.

As the quantity available decreases the price appreciates.

As the quantity of the available wanted item INCREASES, the price drops.

This is simple economics.

My QUESTION is simple....

What happens to the price of GOLD when the "bottom drops out"?

There's going to be no gold on the market at this rate, soon enough. Those who are keeping it won't sell it until there's some massive NEED to do so, then they and many others will DUMP their gold on the market for "money" or something else and the price of gold will crash.

Those holding large amounts will obviously miss the boat.

[Malsua]

The MARKET is INFLUENCED by these things - not the other way around

I don't agree. When big money and I mean massive sums of money are looking to park money somewhere the FED can't inflate away, they buy up commodities. The cost to produce those commodities are the same, the cost to get them to market is the same. The only thing is more dollars are chasing static supply. What gives? Price, it goes up. Every staple that we use then follows suite.

There is no quest that dollars have value. Dollars can create work for you, they can feed you, they can buy assets for you. The problem is that the dollars are created out of thin air. They're created by dictate, fiat. The fed decides more money is to be in the system and then there is. Now you have a larger demand pool of money and a static supply side of assets. Prices will go up. Print enough money and you have hyperinflation or at least severe stagflation.

Look, I want to be clear here, I don't believe we're going to be running the wasteland pursuing the juice. Mad Max is dystopic science fiction. I don't believe we will ever get there. What I do believe is that we could have periods of time where things get interrupted. There will always be a government. We create wealth, government destroys it. This is what governments are and we allow them to do this because it benefits us in some fashion. The problem arises when government destroys it faster than it can be made and we're currently in that mode.

[American Patriot]

I don't agree. When big money and I mean massive sums of money are looking to park money somewhere the FED can't inflate away, they buy up commodities. The cost to produce those commodities are the same, the cost to get them to market is the same. The only thing is more dollars are chasing static supply. What gives? Price, it goes up. Every staple that we use then follows suite.

I agree with the commodities statement, but again, my expertise is no where near this field. I am merely trying to understand it better. I don't believe there is a major market crash coming based on "fiat dollars". I DO see it coming based on the crash of gold prices though!

There are two ways to look at any subject, and you can look from the left or right, the right or wrong or the middle looking out or out looking in.

The problem with this is actually simple. Rome and Greece BOTH fell. Both were not unlike the United States in government systems. BOTH had similar monetary systems to the US.

BOTH of them seemed to die from within based on a fall of currency. So, I'm not doubting anywhere that the possibility exists at all. In fact, it's likely to occur. But, perhaps not as we all are gazing at it from our limited world view.

What I mean is, the market system is not a small, self-contained micro-economic system that will fail on a whim. It's a global system made up of some four hundred countries, some more or less limited in scope but still a massive, massive system. There are dozens of large economic powers out there. If one fails, they all won't necessarily fail. If WE fail, most will go down with us.

The EU is Europe's attempt to isolate themselves from that unfavorable circumstance. Will it work? Maybe. Will it pull us back OUT of the muck? PROBABLY.

There is no quest that dollars have value. Dollars can create work for you, they can feed you, they can buy assets for you. The problem is that the dollars are created out of thin air. They're created by dictate, fiat. The fed decides more money is to be in the system and then there is. Now you have a larger demand pool of money and a static supply side of assets. Prices will go up. Print enough money and you have hyperinflation or at least severe stagflation.

I understand inflation. I DO understand that to some greater degree this is what killed Greece and Rome. They couldn't keep up with the want and need of the people, and they had massive greed. Corruption. Sound familiar?

It's not the money, it's not the market. It's greed, the power, the corruption that will ultimately doom every country, perhaps including the United States eventually.

Look, I want to be clear here, I don't believe we're going to be running the wasteland pursuing the juice. Mad Max is dystopic science fiction. I don't believe we will ever get there. What I do believe is that we could have periods of time where things get interrupted. There will always be a government. We create wealth, government destroys it. This is what governments are and we allow them to do this because it benefits us in some fashion. The problem arises when government destroys it faster than it can be made and we're currently in that mode.

I disagree with this. If the economy fails - world wide, this is PRECISELY what we will be looking at. We pulled our asses (and the rest of the world) out of the Great Depression) BECAUSE a "socialist" President created government jobs - and this is the main fallacy that Obama is laboring under. It wasn't the creation of the CCC camps and such, it was a war with Germany that brought us out.

People HAD to go back to work. People HAD to get paid. We had to defeat an evil in the world that well might have defeated us had we sat on our asses and waited.

Hitler used the Great Depression to grasp first at straws and finally grapple power from the German government - and eventually over ran more than dozen countries. He used the crash of 1929 and the subsequent crash of the German Mark to bring millions to his side, in strength and eventually nearly over ran most of Europe.

If not for the United States, Britain would have been the 15th country.

Money, friends, in all it's forms makes the world go round as far as the human race is concerned.

There won't be another "Great Depression". I don't think I will miss my mark either. Americans are damned pragmatic when it comes right down to it.

We make stupid mistakes by listening to hollow words like "Hope and Change" but we do make course corrections, from time to time. NO ONE wants another Revolutionary war in this country. NO ONE. Not even the kooks that THINK they want one.

The only American Revolution that will be fought again will be at the ballot box this November and next November.

I predict, quite readily too, that we will recover the House, but not the Senate. In 2012, we will recover the Presidency and put a kabash on any more "Social Programs".

If you're in one, better get out now.

Or get what you can from them.

In 2012, I predict we will either take the Senate or at least equalize it to the point to make it difficult if not impossible for the Socialists to regain control for another fifty years.

After elections I see the price of gold beginning to hold steady or drop. In 2012 I see the price going back to a more stable level of around 400 bucks per ounce (or holding a bit higher).

I see the price of gas dropping - immigration "reform" getting fixed (eventually) and Iran getting a nuke, using it and being obliterated.

But that's all neither here nor there.

My plans to retire continue on course, on speed and with a few large waves and a gale or two coming. But reach my destination, I shall.

[American Patriot]

Just to illustrate something I said above... I found this article just now. This guy seems to agree with me actually.

Color highlights are MINE.

http://www.guardian.co.uk/money/2010...oose-investors

How long will gold remain the golden goose for investors?

The price of gold has soared in recent years, but experts warn that the bubble could burst all too easily

• guardian.co.uk, Thursday 26 August 2010 07.00 BST
• Article history

The price of gold has risen by 123% since early 2006. Photograph: Chris Collins/Corbis

The popularity of gold has rocketed in recent years, reflecting the investor stampede to traditional safe havens at a time of extreme volatility in equity and property markets. The gold price has soared from around $550 in early 2006 to $1,227, a 123% gain compared to the drop of 5.4% in the FTSE100 and 4% in the Dow Jones Industrial Average during that time.


Predicting the price of gold can trick even governments into making mistakes. Gordon Brown famously lost out by selling large chunks of the UK's gold reserve between 1999 and 2002, getting a lowly price of between $250 and $300 an ounce – making his decision to sell a costly one. But investors with the Midas touch have made a fortune in recent years.


The World Gold Council says demand for gold will remain robust during the remainder of 2010 as a result of accelerating demand from India and China, as well as increasing global investment demand driven by continuing uncertainty over public debt and the stuttering economic recovery.


But the WGC's mission is to stimulate and sustain demand for gold, and professional investors are beginning to think differently. Phillip Gibbs, manager of the £600m Jupiter Absolute Return Fund, has recently sold out of his position in physical gold according to Citywire, while online trading news service DailyFX says the current rally in gold could be unsustainable, with the bubble set to burst at the first sign of weakness.


Ilya Spivak, DailyFX's currency strategist, explains: "Real gold demand looks decidedly lacklustre, with use of the metal for the manufacture of jewellery, as well as for industrial and dental purposes, clearly tracking lower. The truth is that the rally has become self-fulfilling, with its appeal to investors dependent almost entirely upon its continued gains. It leaves the door open for a sharp reversal at the first hint of a meaningful setback."


Gold does not produce any income, interest or dividends and the price depends solely on demand and supply. If large institutional investors pull out, the risk is that retail investors who bought at the top of the market will be the ones who suffer. But what might cause a sudden decline in the gold price?


Most experts believe that low inflation or deflation would see gold stumble, though it is far from obvious what inflation will do in the coming months: historically the price of gold has risen in line with inflation.


Will de Lucy from Amplify Trading explains. "As governments have extended their borrowing there are concerns that some nations may not be able to sustain debt repayments in the event of another downturn, thus increasing the demand for safe haven assets away from government debt towards gold.


"Also, some countries, such as the UK, may also be faced with an inflation problem as well as growth concerns, further increasing the inflationary-proof investment of gold. We have seen significant price gains over the last 24 months but it would be dangerous to predict the bubble in gold being burst due to the above. I think it is too early to expect demand for gold to subside."


Adrian Lowcock of BestInvest says it is difficult to forecast inflation figures. "Currently you can drive a bus through where experts believe inflation will be, but there are enough in the deflationary camp at this point of time, which will impact on the value of gold as the price will fall if we have deflation."


That said, Lowcock doesn't hold with the deflation argument and believes instead that there will be mild inflation.


Edward George, senior economist at the Economist Intelligence Unit adds that even if the price falls by 20%, "we do not believe the price can fall below U$800/troy oz for long, as over half of current gold mining operations are only profitable at a price of at least US$1,000/troy oz. If the price falls below this level for a long time they will simply stop producing, reducing supply and ultimately driving up the price again."


Spivak says any price reversal will be particularly dramatic because there are now so many exchange-traded funds used as a vehicle for gold investment, which makes gold positions much easier to liquidate. ETFs have become the default option for gold investors because they are so easy to use – you can trade commodities, indices and sectors in the same way you trade a single stock – and sales are on track to eclipse those of actual bullion.


"The problem with ETFs is that, while they make buying gold comparatively easy, they make liquidating the investment easy as well, prompting a far more violent downturn than would otherwise be the case should trader sentiment reverse," Spivak says.


While many investors choose to access the virtues of gold via the equity market (either directly through listed mining companies, via collective funds or the exchange-traded fund market) – investors have also been busy buying up actual gold in the last four years.


The BullionVault gold store, owned by about 20,000 individuals, now looks after 21 tonnes of gold – exceeding the central bank bullion reserves of most of the world's currency systems including, for example, Canada (3.4 tonnes) and Mexico (3.5 tonnes). The company only launched in April 2005, but since January 2006, the value of client gold property has risen from US$9.1m (536kg) to US$833.5m (21.043 tonnes).
That said, AWD Chase de Vere's Patrick Connolly, like most financial advisers, believes investors can get adequate exposure to gold and other natural resources through broad-based equity funds. "If investors are keen to increase their weighting, then we recommend funds such as BlackRock Gold & General and JPMorgan Natural Resources. Even then, because investors will have exposure through broad-based funds anyway, we would typically limit any specific exposure to a maximum of 5% of a portfolio."


BestInvest's Adrian Lowcock also recommends the Blackrock Gold and General fund for mutual fund investors keen to get in on any action.


Consumer awareness of the higher price of gold and difficult economic conditions has created increased demand for short-term cash, which has led to the rise of companies on the high street and online promising instant cash for your gold jewellery; though some of these have been found to offer derisory amounts for cash-strapped people's heirlooms.


Pawnbrokers are cashing in. In the six months to 31 December 2009 (its last set of financial results) Albermarle & Bond announced an increase in gross profits of 31% to £26.3m, in part due to a strong performance from gold purchasing.


David Bostock of pawnbrokers Mays says one effect of the increased gold price is that the higher the price rises, the more customers can borrow. "We warn customers not to borrow more than they need. If they only require £300, there is no need to borrow £1,000," he said.

basically the experts are at odds. They are saying opposite things above. But in general the part about a collapse is correct from my own limited understanding of the market.


My investments are all in mutual funds that are diversified into several things, including overseas and US investments. All in all, every, single person I know, regardless of the types of investments they had in respect to the market took a huge hit a couple of years ago, as much as 33% in that nosedive.

I've held out, unlike a few friends who sold at the bottom of the barrel. MY stuff not only rebounded but is doing ok now.


It's not "gold" though, it's "monetary investment". Is it safe? Nope. No safer than sticking it in my mattress and hoping the house doesn't catch fire.

But it works.

[Malsua]

This is some doom and gloom, placing the problem on the Chinese for pegging the RMB.

It's also correctly identifies in my opinion how the FED will attempt to solve the issue by out inflating everyone else. Since we import so much junk, that junk is going to go up in price and helping to balance the trade.

What we really should do is tell the fucking Chinese to float the RMB or imports from China are banned. Period. End this shit now. We'd have a manufacturing boom in this country after the re-adjustment. That re-adjustment would be result in the doors slamming of companies like "The Great Wall Mart" and "Best Chinese Buy" unless they radically restructure their supply chain.





---------------
http://www.marketoracle.co.uk/Article23514.html

Currencies / Fiat Currency Oct 15, 2010 - 03:41 AM By: Peter_Schiff
As the recession and resultant stimulus packages add to higher unemployment and increasing public-sector deficits, the government is seeking to boost the value of overseas earnings that are accrued by US corporations. To aid in this effort, the Fed is being pressured to erode the value of the US dollar, thereby making foreign sales more lucrative in nominal terms. But this form of stealth protectionism will fail just as surely as more overt trade barriers.



Like all commodities, the relative value of currencies is influenced by reward, risk, and future expectations.

The interest rate earned by holding a particular currency represents the 'reward' end of the equation. Assuming similar risk profiles, money tends to flow towards the currencies with higher interest rates.

Relative risk is in the eye of the beholder and often is difficult to quantify. In the main, investors view a nation's balance of payments deficit as a major risk factor in evaluating the relative value of its currency.

Another long-term measure of risk is government debt as a percentage of Gross Domestic Product (GDP). If a large national trade deficit is accompanied by a relatively large debt-to-GDP ratio, the level of risk is increased.

Given the current state of the global economy, it should be clear to all that the US dollar is being priced higher than is warranted and the Chinese yuan is priced lower.

For over a decade, China has exported into an American market that was open and receptive to cheap products. In response to the demand for these new products, the Chinese yuan should have risen sharply against the US dollar to balance the massive Chinese trade surpluses.

However, the Chinese have pegged the yuan to the dollar, preventing a natural rebalancing of the two currencies from taking place. Not only has this generated a politically dangerous and economically unsound trade imbalance, but it has made the dollar appear stronger than it should, given the frail state of the American economy.

Left alone, internal pressures and common sense would have driven the Chinese government to eliminate the peg. To understand why, consider this: even if China didn't accept one more dollar, any attempt to spend its massive reserves would cause the dollar to drop like a stone. How long should we expect them to keep digging themselves into this hole?

Unfortunately and quite predictably, Washington isn't allowing the market to naturally correct. Instead, the Fed is attempting to devalue the currency by the printing press. Now we can expect not only the deluge of foreign exchange reserves to flood our economy, but also additional dollar tsunamis emanating from our own central bank. This makes a tragic situation worse, and risks instigating a full-blown trade war between the world's largest consumer and its largest producer.

Meanwhile, other countries whose economies are heavily dependent on trade, such as Japan, Switzerland, and South Korea, are finding their exports hit hard by the simultaneous devaluations of the US dollar and the Chinese yuan.

On October 2nd, the Financial Times (FT) headline was: "France Pushes for Currency Accord". It was reported that even China was supportive of the French initiative. Then, on October 5th, the FT headline was: "Call for Global Currencies Agreement". This time the call was from a group of some 420 of the world's leading bankers. Finally, on October 6th, the FT headline was: "IMF Chief Warns on Exchange Rate Wars". Clearly, certain government leaders and bankers are aware of the risks of competitive currency devaluations. The question is whether parliamentary politicians will support currency stability in the face of increasing recession. The two most influential central banks - the Fed and People's Bank of China - certainly aren't setting a good example for the rest.

Only when currencies are allowed to float freely will trade imbalances be corrected. Washington's attempt to force the issue is only doing harm to the world economy by introducing uncertainty and punishing the prudent. The Fed has gone radioactive, setting off a global currency meltdown. Perhaps only gold can truly shield investors from the fallout.

[American Patriot]

We take in roughly 3 times more stuff from china than we sell to them. That's what I gathered from all my reading yesterday.