Market Comments July 1 2008

[theCommenteer]

There's a Money Week piece on inflation today which agrees with Hans except on the point of gold and silver. I can't seem to include the web address however I mangle it, but you can probably google it.

[theCommenteer]

google "money week deflation," if interested.

[kkob]

Iraq would be producing only about 1 million b/d more than now without the war. Saudi Arabia filled in after they went off-line. But, oil is declining at over 5% a year. That's closet to 4 million b/d we need each year of NEW production just to tread water. Add another 1.3% increase in demand, and we are near 5 mb/d just to break even. It's not happening.

Economics doesn't explain finite resources well.

Peak Oil.

the oid drum

[kkob]

Further, oil is finite and our ability to produce it is limited by geology, current technology, and other factors. Because it is finite and is the backbone of our civilization, scarcity creates very high prices. Oil production (crude) has been flat for three years while demand has soared. How can prices not rise? Also, the large price rises started in 2003: before the housing bubble, before the speculators scare and before the economy was tanking. Is it due to Iraq? No.

[kkob]

When discussing commodities it is best to consider which are necessary and which are discretionary. Oil and food are non-discretionary. The other consideration is which are renewable and which are finite. Oil is finite. If you look at the price of oil, it has risen far higher than the dollar has fallen. It is not a bubble. Further, it is not speculation. Speculation is restrained in oil: speculators can't take delivery so the price is its true price each month. That is, they can't hoard it.

[sollycardy98]

but inflation will surely skyrocket when market goes down even more?

[poodlepink]

No don't run out and sell shares and crash the market!!

[farmanntv]

This is a timing game.

Again: timing.

Cash now, only now, for the short haul.

Do not hold this cash more than 1-2 years.

[joshrain1]

how will cash will buy you more when the dollar is being devalued? we export inflation and are a huge importer so we are importing inflation. foreigners will demand more usd (devaluation) and will sell it to us at a higher price. lets say all assets fall, then china will benefit, they hold lost of our reserves and will buy everything for peanuts. what about the huge debt we owe? we will pay a lot of cash and they continue to buy the world resources and we are broke.

[SunnyDaysRFun]

Listen sir. I don't like the fact that you USE Ron Paul to inspire traffic to your video. Ya make me sick.

[farmanntv]

You have a point, I will consider that.

Though I aim to speak from a Ron Paul perspective of the world.

I did several videos today with the same Ron Paul background.

[hqlion]

Dropping demand? Where does the money go? Market could go up or down (down more likely at the moment) because if high inflation or hyperinflation occurs many stocks and physical goods will go up, but cash will loose value. Currently reserve banks of the world have money supply at high rates (competitive debasement), excess money needs to go somewhere.

[GamlGandalf]

What if the complete monetary system crashs with all the crisis? Gold is solid. At least I make 50/50 cash/gold and of course food enough for 2 years in the bunker. :D

[greenmarcosu]

This may be a dumb question but if my money is in a checking or savings acount is that still considered "cash"? Also, what is an easy way for the average person to diversify into other currencies?

[farmanntv]

Yes.

And yes, talk to a broker to buy bonds or buy notes.

This is for 1-2 years only.

[justiceforall2008]

Another aspect is that very few "average" Americans even own Gold, other than maybe a wedding ring and a few coins. When the banks start calling on their loans people in the U.S. aren`t going to flood the market with Gold because they essentially have none.

When the banks start calling on the loans is when the sh!t hits the fan anyway and the real depression will set in.

[justiceforall2008]

Yes, Peter Schiff is saying exactly the opposite. I tend to agree with Peter in light of the fact that he has correctly been predicting what is going to happen and when for about 4 years now.

Gold and Silver are real money. They are inflation proof and always good to have as a security. That is the important difference... I certainly wouldn't buy Gold as an investment, but certainly as a security.

[davincij15]

People need to stop listening to this guy and get out of cash.

The dollar is backed by nothing as we speak right fracking now $106 billion has been created out of thin fracking air for the banks. And the fed will continue with 31 billion a day printing. That means all your cash as been devalued.

This guy is Ron Paul supporter he should know this.

Go talk to Peter Schiff he is a real Ron Paul supporter that has not sold you out like this guy has.

[davincij15]

Wow people are still in this market? I failed to cash out in January when you first said so. But did so in February and got into gold and silver after it fell.

[farmanntv]

Well done.

[theCommenteer]

A falling dollar should support commodity prices, not accelerate their decline, though that might not be enough to keep gold and silver up. It will be interesting to see if you're right. There are some parallels to the 70's here, the prices of oil, gold and silver behaved in the way you predict now, as we went into the 80's, but there are some fundemental differences too. I don't know what's going to happen.

[boots920]

Cash ? If its not backed by anything isn't is worth only paper value. The governments around the world have the printing presses going 24/7. Here say but this has me worried about cash. 100 trillion dollars worth of currency circulating, 1.4 trillion worth of gold in existence.

[theCommenteer]

But the money supply does not equal the physical currency. Most of it is credit. That's why we don't have hyperinflation. The printing presses are not running 24/7. Actual cash is relatively scarce.

[davincij15]

It boggles the mind peoples ignorance...

A digital dollar and a cash dollar are the same thing. So if there is 14 trillion digital dollars of witch there is only $400 billion in physical cash it does not matter. They are the exact same thing. You can buy the same thing with a digital dollar as you could with a physical one.

[theCommenteer]

They're not exactly the same. We can have a credit contraction, as we're having now, and the money supply tightens. If it was all physical currency out there somewhere, there would be no contraction and cash itself would have a fire sale, hyperinflation.

[davincij15]

So what your are saying is that I can take a paper dollar into the gas station and get $1 gallon of gas. While if I use my credit card I pay over $4.

LOL

Google "Money as Debt" this will help you understand what is going on with the credit crisis.

[theCommenteer]

Another one of those "this is what you're saying" guys! Look, you do what you want. You're way smarter than everybody else.

[davincij15]

There is a reason why 16% of the population makes over 100k.

When the dollar collapses and you are flat broke Remember gold and silver is money it has been money for 6000 years and will continue long after we are gone. No other form of money has survived the greed of men who have to power to create it.

I have no pity for you now you will suffer because you refused to investigate.

[theCommenteer]

What little money I have is all in gold and silver.

[davincij15]

Then what are we arguing about then?

Go buy food and things you use every day like soap, and deodorant as well.

If by some off chance we are not in Hyperinflation the stuff will still get expensive.

[theCommenteer]

I think gold and silver are my best bet, but I know I could be wrong. If the Fed Board decides that the integrity of the dollar is worth it, they can jack up the rates and gold goes down, just like the early 80's.

[davincij15]

He is not will not raise interest rates enough. As Peter Schiff once said when some one on TV asked him if Ben raised rates would the dollar go up he answered.

You are asking me if pigs had wings would they fly.

For him to raise rates to what they need to be they would have to admit to the phony CPI numbers the government is reporting.

[GamlGandalf]

:D ... but right!

[joshrain1]

cash is in the form of treasuries that many people have as reserves.

[theCommenteer]

A treasury bond is just a promise to pay, not cash. Most of our "money" is just promises to pay, promises to pay paper, which itself used to be a promise to pay. So, a treasury is a promise to pay a promise which isn't any good anymore.

[theCommenteer]

What he have now is very much like a fractional reserve gold standard, the rare physical currency taking the place of rare gold as it backs the credit. It works so long as the physical currency is rare and there is no run on the physical currency. Confidence comes from the fact that the government backs bank deposits and can print up the currency if needed, so we don't get general banking collapses anymore as we did under a gold standard. The price we pay is a constant inflation.

[davincij15]

You are correct but the limited intellect of the people here do not understand that you do not mean literally printing money as central banks around the world can just make a book entry. BTW: That means money is placed into a bank account without taking it from someone else.

[justiceforall2008]

So in other words, gold and silver are fine, just sit on it until the sh!t hits the fan.

[TheCZMan]

If you listen to the whole vid, well,no. Banks are going to recall their loans, forcing people to sell gold and silver to cover for the recall hence a drop in gold and silver prices if I understood the vid well.

[theCommenteer]

He really DID say that!

[farmanntv]

Yes, that is correct.

[zerosleep73]

Isn't cash becoming worthless by the minute because central banks continue to print money? Even the most stable fiat currencies like the swiss franc, yen, and yuan are not backed by anything. You seem to suggest deflation, I am anticipating hyperinflation to pay off debts and infuse more credit into a sluggish economy. What are your thoughts on that?

[farmanntv]

Hyperinflation will come, but not now. It will be later.

[Tackleqb]

I think we should rather invest in silver and gold because their value does not decrease only fiat currencies do....so it will probably be a better idea to invest in hard assets like gold and silver not other foreign fiat currencies like yen and euro

[Zhuangyao]

How can u keep cash when the helicopter man is printing money?

US dollars will be worthless in 4 years' time.

[farmanntv]

Cash for the intermediary time.

Not for the long haul.

[LemuriaInTheSea]

Thanx Hans for your advice.