Dr. Marc Faber discusses the Chinese bubble, the US bubble, PIIGS, gold, oil, reserve currencies, and geopolitical considerations on February 5, 2010.
If you ask me about the correction in the gold market, yeah for sure there will be corrections. We already corrected more than 10% from the peak and I think the correction can last somewhat longer.
But when I look at Mr. Obama, and at Mr. Bernanke, and at Mr. Tim Geithner and Larry Summers, the one thing I will never do in my life is to sell my gold.
Dr. Faber argues that all of the governments in the Western world will go bankrupt because of excessive spending, and in the lead up to banruptcy we will see out of control monetary policies:
I’m convinced that the US government will go bankrupt, but not tomorrow. And before they go bankrupt they’ll print money and then you’ll get very high inflation rates. Then you get a depression with high inflation. Eventually they’ll go to war.
While an argument for deflation in terms of a credit contraction can be made, Dr. Faber addresses the other view. As our government goes further into debt and economists like Mr. Bernanke attempt to prevent the ‘threat’ of deflation, they will have no choice but to print more money.
Considering that the system has been floated for years already, it is not out of the realm of possibility that the system will continue to be floated for years to come. It is difficult to predict exactly when the breaking point will be, but be assured that the bureaucrats will take us as close to the break point as they possibly can. And if history is any guide, we can be certain that they will not only take us to the breaking point, but blow right past it until the system itself literally falls apart on a massive economic, political and social scale.
Marc Faber / Russia Today:
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“But when I look at Mr. Obama, and at Mr. Bernanke, and at Mr. Tim Geithner and Larry Summers, the one thing I will never do in my life is to sell my gold.”
Ha ha. That’s comedy gold, literally.
If you never, EVER sell your gold, or at least use it for barter, what’s the point of having it?
Then again, I imagine Faber probably means that he won’t sell (or barter) his gold until the S really HTF…and he needs it to buy food, etc.
That being said, I’ll repeat my belief that if the S really, really HTF (e.g., The Road Warrior), the last thing people are going to give a damn about is gold. Food, water, clothing, ammo, etc. will be much more valuable.
HOWEVER, if we get to that point, first there will most likely be a period during which gold absolutely skyrockets – to like $5K or $10K an ounce…and if things continue to deteriorate from there, more practical items will be more valuable…
As I picked up from Steve Keen not to long ago – “if you think you need gold, you need lead more.”
“If you think you need gold, you need lead more.”
Excellent point Rick.
There are those who may be buying gold as an “investment”, much like people did in the 70’s. Most are probably buying via paper stocks, ETFs, etc.
But for those who think the SHTF and gold/silver is going to be a form of currency, the definitely stock up on lead.
If it gets to a point where people are bartering for goods, then America as we know it today will be gone and there will likely be complete breakdown in governance, law, security, and transportation. TEOTWAWKI.
Let’s hope we’re talking more like 1970’s style gold investing.
Points well taken, but what if the SHTF and you want to leave the USA? What are you going to do and how will you make a life for yourself somewhere else? That is just one reason why you need gold. You need lead too, but you have to have a portable money supply.
My thoughts were to heavily invest in silver and use it to make a killing, then take that money to purchase barter items (Guns and Ammo, etc) and more preps such as underground fuel tanks, bunkers, etc.
However, I think it may be way too late to do any of that by the time the skyrocketing of the prices occur. Consequently, I think about the only good way to prep for TEOTWAWKI is using physical silver or gold. Though it won’t be worth anything initially, it will when things come back. HOWEVER…. Why invest in something that is virtually unusable during TEOTWAWKI. I think what I am seeing here is that I should invest in guns and ammo. At least it can be used in a pinch and it will be as good as gold, especially in the beginning stages.
So, is making a killing, profit wise, immediately before the collapse anything to be considered? I’m thinking that answer is no. Thoughts please…
NetRanger – So, you’re saying that even if gold/silver skyrockets right before the S really HTF, the window for “making a killing” then using your profit to buy legit “prepping supplies” will be so small that it will virtually be impossible to actually buy your prepping supplies. Is that your point?
If so, I think it is an excellent one…and definitely something to consider.
The only question then is whether you really think things will get so bad that gold/silver will “effectively” be “worthless…” (or at least their value relative to “supplies” will take a serious hit).
If your answer is yes, I agree – perhaps loading up on guns, ammo, supplies, etc. is the way to go right now…
Hey, at least we’re living in interesting times.
You got my point. I don’t think you can “make a killing” except in dollars. In other words if an ounce of gold buys a good AR now, after SHTF it will still buy an AR (or maybe less!). My thoughts were to buy gold (I really like silver better. It swings wider.) via an ETF or two and, at the spike, cash out using the perceived increased value in dollars to buy way more than gold would buy. So, now, those dollars for an ounce of gold that before the spike would buy a single AR, cashed in now might buy two ARs and 1000 rounds of ammo. Get my drift? But, if I have to actually buy physical gold (which I will and do have some, mostly silver though) I think the price of an AR will actually go up. So you might actually have to give an 1 1/2 ounce for an AR because, well, you can’t eat gold and you can’t shoot it. Since no one has ever really done this sort of “investing”, I’m simply throwing ideas out there in places where I know the big fish are. (…and the case of this site, THE WHALES!)
😉
Comments and critiques welcome.
Oh, you are simplifying even more…
Who gives a damn if the nominal (in dollars) price of gold shoots way up IF the nominal price of “SHTF necessities” (e.g., ARs) shoots up at the same time? Yeah, my gold might be worth $5K at that point, but if an AR also costs $5K then (as opposed to $800 now) I haven’t done myself a lick of good really…
…and that example is assuming “even inflation” (or just price increases really) for gold and guns…
…BUT as you and I seem to agree on, there is a chance that if we really go Mad Max, that AR might shoot up in “price” a lot faster than gold.
All I can tell you is this – I am 100% confident that my guns and ammo will never, ever be absolutely worthless.
I have very, very few other items about which I can say the same thing.
On a related tangent – do you remember this episode of the Twilght Zone?
http://en.wikipedia.org/wiki/The_Rip_Van_Winkle_Caper
…just something to think about.
I have a very good memory and I do remember seeing that episode. I’m not thinking that will be the case, however, on never knows for sure.
Well, I see that your aren’t giving much credit to riding the spike and using that to increase my buying power. In effect, to profit from the spike. It sounds to me that I should just buy guns and ammo and some physical metal. Rather than using the spike to profit, just use the spike in ARs (or AKs or Mini-14s or shotguns or ammo)Â directly use it as trading later.
Buying the ETFs for speculation just sounds too iffy. I’ll just buy the guns and ammo. I’ve been doing that for 30 years and know what I’m doing. Then, they’ll be worth whatever later. The bad thing about guns (not ammo) is its hard to make change with a Marlin 336 in 30-30. But, with ammo, its easy. I’ve been going a little lite on ammo. (But heavy on the reloading supplies.) The boy will need something to do. I don’t want to have to be running the genny to keep the Xbox running. He can load 44 Mags for fun!
Now, if we can just convince my wife that I’m “investing”. She’s still not fully confident.Â
Is Marc Faber planning to take his gold into afterlife? Or, maybe he realizes he will be like a rich man from the Bible, who got more wheat than he could store, decided to tear down old barns and build bigger ones, but that night his life was taken away from him. Maybe Marc Faber believes that his life will be taken away in economic collapse.
Words of St. John Chrysostom come to mind, “Your rubies are the blood of people you did not help.”
NetRanger – well, I think you COULD ride the spike in precious metals and cash out in time to use the extra buying power to buy “SHTF stuff.” I think that IS possible…
However, the thing that would concern me (something that never occured to me before reading one of your comments) is if gold/silver shoots WAY up (e.g., gold at $5K), what is going to be the state of the rest of the economy?
That is, if we see such an increase in gold, how much is other stuff going to cost? – not just guns and ammo – but everything? On top of that, such an environment might scare more and more people into buying guns/ammo such that those prices shoot up even faster than gold…
Denninger is one of the guys who often says “gold is NOT a hedge against inflation.” I think what he means by that is there is a presumption that if gold sees such a crazy spike, we will be in a seriously inflationary environment…so, even though an ounce of gold has shot way up, perhaps the nominal cost of other items has shot up in a similar fashion. So, I THINK the concern is that there is a chance that even though the nominal price of gold will have increased, it will not have any more buying power…because everything has gone up in price.
I think that makes sense to me…especially if we see legit, across-the-board inflation, such that wages increase too along with gold(big, big IF there).
That being said, the gold/dollar (and everything else for that matter) relationship HAS NOT behaved in such a way over the past year…(then again, we are most likely in a deflationary environment as of right now).
Either way though, you probably have it right – buying some guns/ammo and some physical metal seems like a solid middle ground…at least in the long term.
Gold IS a hedge against inflation. When FDR changed the price of gold to $35 / oz you could use that $35 to buy a new suit of good quality or an oz of gold. Today you can still buy a good suit for the price of an oz of gold, but for $35 you can only buy a good tie. See?
Gold (and silver) has been a store of value and a medium of exchange for millennia. They will remain so. It is a way to preserve SOME of your wealth so that ALL of your wealth is not destroyed when markets collapse; not unlike the value of your home when the bubble burst; or your stocks when the DOW and S&P 500 collapsed.
Obviously, you need to make a judgement as to your personal requirements for food, fuel, guns, and ammo, FIRST, in the increasingly likely event that the SHTF. But after that, with your disposable income, and until the SHTF, do you want your wealth in a savings account, 401K, IRA, equities, or bonds (ie someone elses’ debt), ETF’s, Options, or commodities? So the question THEN is: How do you allocate your wealth, your portfolio, until then?  That is a bigger question than time or space permits, but given the fear and uncertainty in the markets, today (and rightly so) liquidity should be your number one goal AFTER those items above (FFGA) have been addressed, and after you have a store of silver and gold of some amount; or even metal money as I have (because I already have my gold and silver).
Make no mistake about it. We are in an inflationary evironment for consumers. Not a rampant inflation like we have seen before, and not a hyper-inflation which we are likely to see somewhere down the road, but we are in a slow creeping inflation, and make no mistake, when OBAMA prints TWICE as much money as BUSH, we are in an inflationary environment. As the economy improves, if ever so sightly, energy demand will increase and the cost of oil and gas will increase and those increased costs of production will impact prices across the board for the consumer.
Faber is right on target. He says it exactly like it is. And you can bet your ass that he is totally prepared for TEOTWAWKI and totally diversified by asset class, country, liquidity, and precious metals. I’ll bet he even has FFGA somewhere!
OBTW, FFGA? Thats the DNA of a Prepper. 🙂
Comments….. “If you don’t hold it, you don’t own it”… Ponce