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Tracking the demise of the US economy
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06-04-2012 9:58am#1
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OK, here we go again.OfflerCrocGod wrote: »I don't believe that, I know that, the data and the market pricing is clearly showing that.When the cost of buying something increases the amount of money required to buy it also increases. Amazing. What you're saying is that the reason it's going up is solely due to the Fed's QE program which as I've pointed out isn't born out by the data, or by common sense.
You really don't understand do you? At least acknowledge you might be wrong FFS.
There are many elements involved in the pricing of oil, but mainly the supply of oil, the demand for oil and supply of the currency purchasing those barrels.
I quoted the Saudi Oil Minister previously, and now for the Qatari Oil Minister to reconfirm that there are no supply issues.Mohammed Bin Saleh Al Sada wrote:
"Oil producers are committed to supplying. When you look at demand-supply, there is no evidence of a shortage of oil anywhere in the world,"
"There are so many elements--not necessarily part of fundamentals of supply and demand--but other factors."
The rest here.
Maybe you don't trust the oil ministers of Qatar and Saudi Arabia, what about flip flopper Obama?
Obama: Oil supply enough to keep squeeze on Iran
There is no problem with supply.OfflerCrocGod wrote: »At the moment the Fed is engaging in Operation Twist which is not increasing the reserve base but is a reconfiguration of maturities.
You do realise that the effects of QE2 are only being realised now? You don't print and see an instant increase in prices. It takes a little time to get to the consumer as companies resist price increases for as long as possible. Oil, however is one market that feels the effect of the increased money supply due to it's liquid pricing. That's what we're seeing now.OfflerCrocGod wrote: »Apart from that I've pointed out that the last thing you would ever want to do with cheap funding (which you've yet to show is heading to the Brent spot market, or in fact anywhere at all) is to pour it into a tight spot market which is in backwardation. That just doesn't make sense. WTI is in contango for heavens sake! That would be destroying money, i.e. deflationary.
I'm not suggesting that the increased price is a result of speculation.OfflerCrocGod wrote: »This isn't about the future of the US economy, this is about understanding the oil market and terrible misinformation.
The future of the US is dependent on cheap energy and confidence in the dollar, so I think this discussion is very relevant.
If you are concerned about misinformation, I look forward to your apology.OfflerCrocGod wrote: »I just have a terrible compulsion to correct mistakes, especially lazy, biased mistakes were no attempt at understanding data is made.
Economics is very simple. You don't need studies to prove points. Think for yourself about the basics and things will become clearer.OfflerCrocGod wrote: »..... I take a position based on data, marginal buyers, supply and demand and the facts of the underlying market. You know, things that move and determine the price.
There you go again failing to recognise the role of the currency paying for the commodity.OfflerCrocGod wrote: »What does Keynesianism have to do with this?
I was under the impression you thought we should all inflate out way out of this mess? All we need to do is increase consumer demand and increase the money supply and we'll be alright?
From your previous post on my other thread.
That seems to back up my theory that demand is flat in 2012! Schoolboy error from a man who likes to correct mistakes.
Recap:
1) Qatar, Saudi, and USA say no problems with supply.
2) Your chart shows no increase in demand.
3) Your comments re backwardation/contango point to speculation not being a cause.
4) The devaluation of the world's currencies is the true driver of the recent price rises.
I will leave you with this your honour. Crude priced in gold. Up and downs, but now cheaper than it was in the 1950s. Nothing like the major price increases priced in US Dollars in the same period. We can't blame Iran or China for that, can we? How do you explain that then?
Anyone else care to chime in?
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Two lads unwilling to budge from their positions until the end. Now that's what makes a market!
I actually share some of each of your views with respect to oil prices. QE, social unrest and supply constraints have played a major role in moving CL from $70 to +$100 over the last two years.
Gold is a far greater, more instant barometer of the markets reaction to QE. As the FED minutes came out the other evening, gold dropped in a flash on the first hawkish words released. Oils reaction was limited. Saying that, a guy called Chris Cook puts across a theory on dark inventory about how inflation fearing investors are actually pushing up the price of oil and how it could crash again if they pulled out of their commodity linked funds. He's big on the conspiracy theory of oil manipulation but, given his background and how I've seen these markets trade, I can't help but agree with him.
On the supply front. Yes, it's tight in Europe and other places. But, then we have refinery's shutting down all over the world at the moment. US Crude stocks just had their biggest two week rise in ten years. The glut at Cushing just keeps growing, though the Seaway pipeline reversal should help sort the Brent-WTI spread in time. It is a beast though. One thing I'd say though Officer is, there was almost no reaction to the Kirkurk crude pipeline explosion yesterday that currently transports 500K bpd from Iraq to Turkey. It's Iraq's largest pipeline and the two of them were eventually closed as a result of the explosion. The energy market seems to react to news when it suits itself when you think of the instantaneous $2 spike on a rumour a Saudi pipeline had been hit.
Mish has been keeping track of the petroleum and gasoline usage in the US.
The funny thing with all the problems that still lie in front of us is how long they're taking to play out. Maybe it's just my own impatience and the current generation of expecting everything to happen instantly but, I've been expecting Spain to blow up about six months after Lehmans or Ireland had their problems. The Spanish problem is obivous with the housing bubble and their levels of unemployment. With that in mind, the problems of the US that turbo highlights are going to take a long time to play out. Kyle Bass is the man to follow on this stuff!
Do you mind if I ask if either of you are involved in front office, analyst or education in finance? No problem if you do!0 -
You really don't understand do you? At least acknowledge you might be wrong FFS.
There are many elements involved in the pricing of oil, but mainly the supply of oil, the demand for oil and supply of the currency purchasing those barrels.
I understand. If you could show that QE is now leading to the incredible tightness in Brent spot prices I would acknowledge I'm wrong but you're not doing that. As for the supply of currency having an effect, it only has an effect if the currency is used to bid the assets up. When the currency issuer decreases or increases M0 little re-pricing fairies don't fly around markets which are denominated in that currency and increase all prices by the percent change in M0.
Just curious, you do realize that the monetary base can be decreased as well increased? It's not all one way.I quoted the Saudi Oil Minister previously, and now for the Qatari Oil Minister to reconfirm that there are no supply issues.
Maybe you don't trust the oil ministers of Qatar and Saudi Arabia, what about flip flopper Obama?
Obama: Oil supply enough to keep squeeze on Iran
There is no problem with supply.
Saudia Arabia, Qatar and the US are all trying to calm down the panic buying in the market. You may be blasé about the possibility of an Israeli attack on Iran or some sort of crazy stunt by Iran in the Straits of Hormuz but I can perfectly understand why many people in positions to make buying decisions are ignoring these pleasant words and grabbing with both hands while there is something to grab. I've already brought this up several times but the curve is showing the markets preference for immediate delivery, contrast that to WTI. 14% increase for Brent vs 4% for WTI in Q1, to me it just seems obvious that Light, Sweet European focused crude is what the market is desperate for.You do realise that the effects of QE2 are only being realised now? You don't print and see an instant increase in prices. It takes a little time to get to the consumer as companies resist price increases for as long as possible. Oil, however is one market that feels the effect of the increased money supply due to it's liquid pricing. That's what we're seeing now.
As ixus has already pointed out Gold is the market to look at for that kind of effect. QE2 began in Nov 2010. So it takes almost two years for US liquidity to flood into a European focused oil benchmark, neatly side stepping the American WTI (and Natural Gas and Coal and a host of other commodities) and coinciding, by happenstance of course, with a blow up in tensions between Iran, Israel and the US and Iranian threats to close the Straits of Hormuz.
Just to get it straight, that's your thinking?I'm not suggesting that the increased price is a result of speculation.
Then what is causing the increase in prices?!! Consumption?The future of the US is dependent on cheap energy and confidence in the dollar, so I think this discussion is very relevant.
If you are concerned about misinformation, I look forward to your apology.
Pointing out erroneous assumptions isn't misinformation, no matter how dear they are to your world view.
The price of oil has gone up almost five fold in 10 years and the US is still there. Energy stopped being cheap a long time ago.Economics is very simple. You don't need studies to prove points.
I don't know where to begin. I think it explains your - shall we say - 'data light' approach.Think for yourself about the basics and things will become clearer.
Ye, I can see how that's working out.I was under the impression you thought we should all inflate out way out of this mess?
If all else fails that would be preferable to a Japan-style deflating depression (now there is a country that will have a currency crisis).
Keynesianism though does not recommend it and it's not a tenet so I'm pretty baffled as to why you brought it up, I guess it's all the tripe
spewed out by the ZH ilk who seem generally clueless about economics.
There are better ways out of the mess but I'm not hopeful of them being adopted.All we need to do is increase consumer demand and increase the money supply and we'll be alright?
Easier said then done. There also needs to be an increase in the number of safe assets, those have shrunk significantly.From your previous post on my other thread.
That seems to back up my theory that demand is flat in 2012! Schoolboy error from a man who likes to correct mistakes.
What it shows is demand growth of 1%. The oil market is very tight and is very close to hitting capacity constraints this year.
Goldman Sacks wrote:High prices, as bad as they are for an economy addicted to cheap oil, aren't the worst prospect facing us. The real problem is spare capacity....Twenty years ago, OPEC had spare production capacity of about 15 million bpd. A decade ago that had dropped to 5.5 million bpd. [Today], spare capacity has dropped almost to zero.
....In other words, it's likely that we're now in a permanent state of near zero spare capacity, which in turn will lead to an increasingly unstable world. As we enter an era in which even Saudi Arabia has no spare capacity to smooth out supply disruptions elsewhere in the world, any blip in supply, whether from political unrest, terrorism, or merely unforeseen natural events, will cause prices to carom wildly. A world with $100 per barrel oil is bad enough, but a world in which a single pipeline meltdown could cause prices to skyrocket to $300 per barrel for a few months and then back down is far worse.
Due to the current circumstances Brent has hit them, in 2008 (before QE) we went up above $140 (before QE)
By the way did I mention that the price spike in 2008 was before QE?
So the supply of gold has grown slower then the supply of WTI since 1950. That's hardly a surprise, I mean gold is of little to no use while oil is quite useful.I will leave you with this your honour. Crude priced in gold. Up and downs, but now cheaper than it was in the 1950s. Nothing like the major price increases priced in US Dollars in the same period. We can't blame Iran or China for that, can we? How do you explain that then?
Anyone else care to chime in?0 -
OfflerCrocGod wrote: »I understand. If you could show that QE is now leading to the incredible tightness in Brent spot prices I would acknowledge I'm wrong but you're not doing that. As for the supply of currency having an effect, it only has an effect if the currency is used to bid the assets up. When the currency issuer decreases or increases M0 little re-pricing fairies don't fly around markets which are denominated in that currency and increase all prices by the percent change in M0.
Just curious, you do realize that the monetary base can be decreased as well increased? It's not all one way.
Yes of course it can come down and I wish it would come down as I like my money to retain its value, but it hasn't. It is all one way I'm afraid.
You'll like this.
As of November 17, 2011 the Federal Reserve reported that the U.S. dollar monetary base is $2,150,000,000,000. This is an increase of 28% in 2 years.
You can see this here. Plenty of data to keep you happy.
If you cannot acknowledge that the increased money supply is having an effect on oil prices, I think you need your head examined.
Why has the price of almost everything gone up over the last 100 years?
I put it to you that the increased money supply is causing inflation. Now, not everything goes up at the same rate. As you pointed out, natural gas in the US. This is because the supply has increased to due fracking. Brent oil prices are going up at a higher rate than inflation as a result of future fears of supply constraints, as you point out.
The Iran situation is the fall guy for high oil prices. There's no doubt this has put upward price pressure on Brent, but to say it's more of a reason than the loose monetary policy is wrong in my opinion.OfflerCrocGod wrote: »Saudia Arabia, Qatar and the US are all trying to calm down the panic buying in the market. You may be blasé about the possibility of an Israeli attack on Iran or some sort of crazy stunt by Iran in the Straits of Hormuz but I can perfectly understand why many people in positions to make buying decisions are ignoring these pleasant words and grabbing with both hands while there is something to grab. I've already brought this up several times but the curve is showing the markets preference for immediate delivery, contrast that to WTI. 14% increase for Brent vs 4% for WTI in Q1, to me it just seems obvious that Light, Sweet European focused crude is what the market is desperate for.
Perhaps the price of WTI is rising to a lesser extent due to increases in supply from the oil sands in Canada and the Bakken, and less fears about future supply as you pointed out.OfflerCrocGod wrote: »As ixus has already pointed out Gold is the market to look at for that kind of effect. QE2 began in Nov 2010. So it takes almost two years for US liquidity to flood into a European focused oil benchmark, neatly side stepping the American WTI (and Natural Gas and Coal and a host of other commodities) and coinciding, by happenstance of course, with a blow up in tensions between Iran, Israel and the US and Iranian threats to close the Straits of Hormuz.
Just to get it straight, that's your thinking?
Will you please look at the chart for oil and gold since QE1 and QE2 started. In fact you can look at almost any commodity chart for that period and you will see steady increases. Oil hasn't just jumped overnight since tension escalated in Iran. Of course, Brent has jumped a little more since the Iranian fears grew and that is natural.
As a reminder here are the dates, the starting dates are shown by me with little red dots:
QE1: Nov. 2008-June 2010
QE2: Nov. 2010-June 2011 (estimation)
Wait until you see this chart after QE3 is announced, and the money finds its way into the oil market.OfflerCrocGod wrote: »Then what is causing the increase in prices?!! Consumption?
The increase in supply of money, i.e. inflation.OfflerCrocGod wrote: »Pointing out erroneous assumptions isn't misinformation, no matter how dear they are to your world view.
The price of oil has gone up almost five fold in 10 years and the US is still there. Energy stopped being cheap a long time ago.
My assumptions are not erroneous. Yours are!
High oil prices have an effect on the US consumer's purchasing power, and considering how consumptioon driven the US economy rising gasoline prices do have an effect on the US economy.OfflerCrocGod wrote: »I don't know where to begin. I think it explains your - shall we say - 'data light' approach.
People can easily find charts to back up their own point of view. I am trying to reach out to you in plain English and let you think for yourself. Here's a good starter. The increase in the money supply over the last one hundred years has put upward pressure on oil.OfflerCrocGod wrote: »Due to the current circumstances Brent has hit them, in 2008 (before QE) we went up above $140 (before QE)
By the way did I mention that the price spike in 2008 was before QE?
The reason for rising oil prices up to 2008 was down an increase in demand v supply. It was an economic boom time (fueled by debt).OfflerCrocGod wrote: »So the supply of gold has grown slower then the supply of WTI since 1950. That's hardly a surprise, I mean gold is of little to no use while oil is quite useful.
Gold is of little use! I have heard it all now. You need to spend less time looking at your charts and more time reading history.
ixus, you asked if I worked in finance, well I don't, I work in a completely different area, so economics and investing are purely a hobby for me.
Perhaps that is why I see things clearer than OfflerCroc, as he likely works in Finance.0 -
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If you cannot acknowledge that imports of fresh lemons from Mexico are clearly having an effect on the US highway fatality rate then you need your head examined.
Why has the price of everything has gone up over the last 100 years? Well for the same reason the price of everything has gone up over the last 600 years.
Gold/Silver standard meet your very close friend, inflation.
Inflation has always been with us, it has draw backs and positives but in sum it's significantly better then deflation which is simply hell.
I don't deny that increased money supply causes inflation, that is one of the benefits of increased money supply. I have a problem with the lack of understanding of the mechanism of how it causes inflation. The propagation of this misunderstanding can cause monetary authorities to bow down before hard money fanatics and cause unnecessary capital and employment destruction.Now, not everything goes up at the same rate. As you pointed out, natural gas in the US. This is because the supply has increased to due fracking. Brent oil prices are going up at a higher rate than inflation as a result of future fears of supply constraints, as you point out.
I'm happy to see you accept that things can go up (or down) at different rates and are not correlated to M0.
You are even thinking in terms of supply and demand in the market, progress!There's no doubt this has put upward price pressure on Brent, but to say it's more of a reason than the loose monetary policy is wrong in my opinion.
Oh, and then you stab your reasoning side in the back!Perhaps the price of WTI is rising to a lesser extent due to increases in supply from the oil sands in Canada and the Bakken, and less fears about future supply as you pointed out.
The reasoning side isn't dead! It won't back down! It fights back! Go reason you can do it!
For every chart that shows higher prices of a certain commodity I can show you a complementary chart showing increasing use of
that commodity in China, India, Africa and the rest of the emerging world. They are sick of thin gruel, they want meat, cars, smartphones, holidays. They want a better life and now they can afford to bid for it. I say welcome. You're right this hasn't been an overnight thing, as I've pointed out before oil spiked all the way to $140 before there was any QE. The recession helped give the markets breathing space but they haven't stopped growing so the space is running out. Thankfully most markets are able to respond to the demand by increasing supply, farmers are planting record crops for certain soft commodities. This is a tangent but there are still a lot of hungry people to graduate to the middle classes I can see possible supply problems emerging in future when it comes to food, especially with the freak weather events that are happening more frequently...
The US economy, like everyone's, will handle higher oil prices. There is no choice, oil prices are going back up to where they used to be before we found so much cheap supply. We have handled prices being this high, we will handle them again.
People can easily find charts to back up their own point of view.Homer Simpson wrote:Facts are meaningless. You could use facts to prove anything that's even remotely true!The reason for rising oil prices up to 2008 was down an increase in demand v supply. It was an economic boom time (fueled by debt).
More reasoning, this is very promising stuff!
Boom time is still ongoing in the emerging markets so the breathing room that the recession gave the oil market has been reduced. When the market is spooked something will have to give, the price or their consumption. Right now in Brent spot the price is giving.
I can see the possibility of a spike like in 2008, eventually prices go so high you trigger demand destruction. US oil reserves surprising on the upside is good (sort of) let's hope it translates into a softer, less panic-stricken market. The bad jobs report is really good timing too. We can't tell how much Chinese buying is hoarding for their reserves or for consumption - they are totally opaque. Not even OPEC have a clue, they just sell and take the cash. I would love to see Brent crash but I wouldn't bet on it.0 -
OfflerCrocGod wrote: »
If you cannot acknowledge that imports of fresh lemons from Mexico are clearly having an effect on the US highway fatality rate then you need your head examined.
You're starting to embarrass yourself now. You've tried to argue against my comments regarding the increasing money supply increasing the price of oil, by putting up a ridiculous chart of unrelated items. Either a poor comeback or an even poorer joke.OfflerCrocGod wrote: »Why has the price of everything has gone up over the last 100 years? Well for the same reason the price of everything has gone up over the last 600 years.
What a ridiculous data table. It proves my point from earlier regarding people finding obscure data to back up their flawed point of view and calling it fact.
Who compiled this chart and how accurate is it.OfflerCrocGod wrote: »Gold/Silver standard meet your very close friend, inflation.
Come on! We both know that inflation has only gone one way since the US was taken off the gold standard. Prices remained very stable over the long run, only short term price spikes were common on the gold standard.
Here's some data.OfflerCrocGod wrote: »
Inflation has always been with us, it has draw backs and positives but in sum it's significantly better then deflation which is simply hell.
I don't deny that increased money supply causes inflation, that is one of the benefits of increased money supply. I have a problem with the lack of understanding of the mechanism of how it causes inflation. The propagation of this misunderstanding can cause monetary authorities to bow down before hard money fanatics and cause unnecessary capital and employment destruction.
Now, this is where we will never agree. I could talk for hours on the negatives of inflation. In very short, inflation benefits spenders at the expense of savers because debt becomes repayable in cheaper dollars, therefore the "smart" money would logically run up as much debt as possible. But you probably don't think consumer driven debt is a problem.
We need to protect savers.OfflerCrocGod wrote: »You are even thinking in terms of supply and demand in the market, progress!
Oh, and then you stab your reasoning side in the back!
The reasoning side isn't dead! It won't back down! It fights back! Go reason you can do it!
More reasoning, this is very promising stuff!
Don't be so condescending. By the way sarcasm is the lowest form of wit. Maybe I should find a chart to back that comment up, or else it wouldn't be true.OfflerCrocGod wrote: »
For every chart that shows higher prices of a certain commodity I can show you a complementary chart showing increasing use of
that commodity in China, India, Africa and the rest of the emerging world.
Exactly like I said, certain charts can be displayed to spin somebody's point. That's why I wanted to concentrate on logic. We could stay here all day putting up charts that back up both our opinions, and get nowhere.OfflerCrocGod wrote: »The US economy, like everyone's, will handle higher oil prices. There is no choice, oil prices are going back up to where they used to be before we found so much cheap supply. We have handled prices being this high, we will handle them again.
Let's wait and see who is right on this one.OfflerCrocGod wrote: »
The bad jobs report is really good timing too.
Why is that? Because it gives Ben Bernanke the excuse to print more money and give it to the bloated and wasteful US Government?
Here is a wake up call for you.
US civilian labor force participation rate
Since you don't believe that the increased money supply is the driving force behind increasing prices for commodities (you say it's simply supply/demand driven) why don't we just give everybody $1,000 of freshly printed notes, and everything will be fine? They can buy their gasoline at current prices and everyone will be happy.
You like inflation, that says it all.
People think that deflation is evil. If prices keep falling, nobody will buy anything. Dead wrong. Look at the mobile phone market for one. As prices have come down over the last twenty years, people have bought more and more phones. i.e demand has increased, sales have increased and companies have been able to pump money into R&D enabling them to improve their products and reduce prices further.
Lowering prices increases demand.
Deflation rewards savers, inflation punishes them.
In summary. You like inflation, I like deflation.
You think inflation is low right now and not effecting commodity prices. I think it's under-reported and pushing prices up, more so than increased demand from emerging markets that you cite.
You think gold is of little or no use, I think it will outperform all fiat currency over the next decade.
You think that the US economy is recovering, I think its federal, state and personal debts are finally starting to catch up and we will see a period of very high inflation and lost confidence in the dollar. The US consumer will have to leave within his means and companies with a high exposure to US consumers will fail.
I have asked you already to put your money where your mouth is but you ignored me. I am prepared to put up a "USA Demise" Google Finance Portfolio which reflects my views. You can put up a "US Recovery" portfolio reflecting your views and we will see whose performs the best. After all the name of the game is making money.
We can use Friday's closing prices.
€100k. Split into ten different stocks/bonds/index funds/cash/gold etc. Whatever you like. Buy and hold would require the least time and effort so I am happy to go with that, but I'm also happy to play by your rules.
Will you accept the challenge? If you don't, I think your credibility would have to be questioned.0 -
I'm worried by the fact that you didn't understand the point I was trying to make with the lemons chart. Let me try again.
I'm sure eventually you'll get it.
Obscure data? I think you'll like this, that chart comes from This Time Is Different the study that is so often quoted by the hard money fanatics as a reason to constrain government deficits.
I think it's obvious that most have not bothered to read the academic paper.
'Inflation has only gone one way', I presume you mean we have not had to endure grinding deflation since the end of the gold standard? Correct, that would be one of the benefits of leaving the gold standard.
I don't dispute that prices remain very stable in the long run on the gold standard.John Maynard Keynes wrote:The long run is a misleading guide to current affairs. In the long run we are all dead.
The problem with the short run is that it can last for a very long amount of time, decades even.
As for the 'short term prices spikes' they can be quite significant when you are living through them! The gold standard is quite volatile and 'the long run price stability' point neatly brushes a lot of dislocation and volatility under the carpet.
Having one year of 100% inflation followed by five of 20% odd deflation leads to stable prices but your economy will pay for it very dearly. Massive dislocation and unemployment leaving significant long term scars on your productive ability. I'd rather have six years of ~3% inflation thank you very much.
Pick the financial crisis that happened under the gold standard.
Go on. I'll give you three guesses.
There are negatives of inflation I'll agree with you, but I'm not talking about high inflation I'm talking about what we currently have, 2-3% is to be preferred to -20% as the money supply is allowed collapse in an enormous debt deflation as the gold standard lovers wish.
There are other issues with the gold standard which increase volatility, interest rates going down during booms and up during busts, countries sharing the same monetary policy. You end up having a far larger hole to climb out of and it tend to take longer and involves far more pain.
Deflation benefits the money rich which are usually the richest in society. The Gold Standard was favored by the rich and wealthy and periodically tended to inflict massive pain on the poor and middle class.
You seem to have a serious hatred of debt and I hope you're not under the illusion that debt would cease to exist or be a problem under the gold standard. There are three types of debtors, it's not as simple as saying it's all bad, some is good in that it helps foster economic growth and investment and some is bad as it's used to inflate bubbles. These have been with us since the dawn of time and the gold standard or inflation make no difference to them. It really depends what use the debt is put to and also the payment ability of the borrower.
Savers are part of the economy too, it's no use having 1% inflation over the long term for savers if they are unemployed in one of the periodic, deflationary busts where unemployment spikes above 30%. Irish savers were and in fact still are getting good real returns in savings accounts due to the deflation and low inflation in the country, but it doesn't help them if there are struggling to get by day to day.
It's great for the rich though.
You also seem to dislike facts and data. I was trying to explain that increasing consumption would explain increasing prices of commodities.
Although you would classify that as 'spin', I would classify that as understanding market dynamics.
You don't believe that 'stable money' means prices for commodities should never move? i.e. a bushel of corn should *always* cost $1?Warren Buffett wrote:Well, it's always been a mistake to bet against America, since 1776.
I meant the bad jobs report might deflate the oil market a bit, I wouldn't bet on QE3 from this report I'm afraid, I think there is a case to be made for it but I would guess they would wait for more bad news, 60/40 though.
Yes the baby boomers are retiring, should they be forced to keep working? Are we not allowed retire in your ideal world? Add on top of that the large numbers of people who are going to education instead of into the work force.
Giving everyone $1,000 to buy petrol would increase the demand for petrol and push prices up as supply can't compensate for it.
You increase the money supply to prevent deflation and help offset shocks to the economy, that prevents the economy from blowing up and hence allows demand to stay higher then it would be and that supports prices. You are just reducing the amount of pain the economy and all of us have to suffer through.
At the end of the day turbo, we ain't growing no more oil so if the economy goes through 10 years of deflation or inflation the real price of oil is just going one way as we exhaust oil reserves.
The gold standard will not stop higher real oil prices, the gold standard will not stop us from running out of oil.
Supply will meet demand and the price will move according to those two forces regardless of the monetary system.
For the most part we are not selling the same phones we sold 10 years ago for less we are selling much better phones for different prices. You are talking about current spending benefiting from increased productivity, technological advances, process advances, outsourcing and economies of scale. The commodities going into the phones are more expensive then before (or do you recant all that you have been talking about?), it's just the factories are more efficient and our ability and mastery of the technology has increased so we are able to do more with less. That's not deflation, that's innovation.
Deflation is where you take a pay cut.
And you have mortgage which has a fixed amount to repay.
And then the next year you take another pay cut.
And your mortgage still has a fixed amount to repay.
And on and on for years. The only people who benefit? The rich who own the debt.
You want a gold standard turbo? You first with the pay cuts!Lowering prices increases demand.
Tell that to Ireland's housing market! Demand has been going through the roof these last 4 years!In summary. You like inflation, I like deflation.
In summary, you (and most gold bugs) don't understand a) deflation and b) the implications of the gold standard.
I don't care where the price of gold goes these next few years, it's a commodity that is traded mostly for speculation. Currencies are means of exchange not commodities, it's a *good* thing that they aren't as volatile as gold.Will you accept the challenge? If you don't, I think your credibility would have to be questioned.
Simply by owning financial assets you are betting against a 'US demise'. I can't think of single asset I own that wouldn't tank if the US imploded. I can't think of many assets that wouldn't. I can live with you not thinking of me as 'credible'.0 -
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Ok, I have put together this fictional US$1,000,000 portfolio over the last hour, which should hopefully rise as confidence in the US Dollar falls.
The US Dollar has safe haven status at the moment, and my opinion (against the mainstream and my mate Croc) is that at some point in the near future (5 years maximum) the US Dollar in it's current form will no longer be the reserve currency of the world.
My selections are as follows:
1. Physical Gold
2. Major gold miners ETF.
3. Major silver miners ETF.
4. Pretium Resources - my favourite gold and silver miner. Not included in either ETF above.
5. Brent crude ETF.
6. HRT Participacoes - my favourite oil explorer with exposure to Brazil and likely China (Wildcard pick!)
7. BRIC ETF (Brazil, Russia, India, China)
8. Asia ETF (excluding Japan)
9. Agriculture ETF
10. Short 20 year US Treasuries ETF
Rather than abusing my selections, I think it would be more constructive for a poster to make their own selections. It took me a little over an hour to put this together.
I only hold one of the above stocks, HRT Participacoes.
Today, US$1,000,000 = €763,600
Ignore any performance indicators on that screenshot as they relate to Thursday's gains / loses. All prices taken are close of business on Friday.0 -
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OfflerCrocGod wrote: »
Oh you will enjoy this!
Offler, you posted this on My Portfolio thread when I started, in order to convince me, others and maybe yourself that my investments in oil, gas, silver and gold were a bad idea.
The chart shows that commodities have not outperformed inflation over that last 120 years. Strange, I thought. So I eventually got around to checking where you got this chart.
Brace yourself:The index, made up of 25 commodities, excludes oil and precious metals.
So why did you use this chart? I suspect you went looking for a particular chart that would seem to back up your view. Pure deception of people who do not follow your investment thesis.
I hope you are not in the business of advising people.0 -
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Your comment was 'I only invest in commodities' and I pointed out 'investing' in raw commodities is a terrible idea. And it is.
Over the long term gold returns inflation + ~1%, I've said this before but you have difficulty understanding, gold is a store of value, it's not an investment. If you want a real return invest in quality equities if you want to match inflation invest in inflation linked bonds or gold. Over the long term inflation will be your return (roughly gold does not have a sensitivity of 1 to inflation).
badboyblake gold's price is generated by process of speculation by traders, as you put it, there is a real physical demand for it but it usually backs out of the market when it gets overly hot and as turbobaby said it's not a currency but over the long term it is a store of value. Right now though a savings account in Ireland will give you a real return and it's far less volatile.0 -
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