Gold: Past, Present, and Future

vividgull10 said:I'll be the first to admit I don't know this stuff inside out, so forgive me if this sounds like a dumb question...

Basically, are money supply and money velocity interdependent? Specifically, does money velocity depend on the amount of money in the system? (I'm assuming it does.)

The reason I ask is...
If the Federal Reserve increases the money supply (and if that indirectly impacts money velocity since they're linked), then there should be a mathematical relationship between inflation and both variables: money supply and money velocity.
At that point, it stops being a qualitative guess and becomes a quantitative issue. It opens up the possibility where money supply rises and velocity rises, yet the CPI (or whatever inflation metric we use) doesn't rise proportionally—regardless of the function used. In other words, if the money supply skyrockets but inflation doesn't keep pace, shouldn't we actually be talking about real deflation? 😵

The Federal Reserve controls velocity, so there isn't much direct correlation between them—aside from the fact that central banks monitor velocity to try and balance the two categories. It’s similar to how the Federal Reserve targets nominal GDP...

Right now, we are seeing a collision of forces: deflationary pressures on what citizens hold (labor, real estate, etc.) versus inflationary pressures on essential assets (food, energy, utilities). That is precisely where the conflict between deflationists and inflationists stems from.

For instance, I personally bought a tool for 50% less than usual, yet my electricity and water bills have jumped by 30% (though I have my own well and water source, and don't use gas at all 😍).......

Initially, "easy money" doesn't hit every asset class simultaneously. It trickles through certain sectors first. It could take quite a while before the effects are felt across the entire board.

dustyheron5 said:The Federal Reserve controls velocity, so there isn't much direct correlation between them—aside from the fact that central banks monitor velocity to try and balance the two categories. It’s similar to how the Federal Reserve targets nominal GDP...

Right now, we are seeing a collision of forces: deflationary pressures on what citizens hold (labor, real estate, etc.) versus inflationary pressures on essential assets (food, energy, utilities). That is precisely where the conflict between deflationists and inflationists stems from.

For instance, I personally bought a tool for 50% less than usual, yet my electricity and water bills have jumped by 30% (though I have my own well and water source, and don't use gas at all 😍).......

Initially, "easy money" doesn't hit every asset class simultaneously. It trickles through certain sectors first. It could take quite a while before the effects are felt across the entire board.

If I'm following you, money velocity is basically just measuring how fast the cash created by the Federal Reserve moves from banks into the economy through credit. So, you're saying the Federal Reserve controls the money supply while the market drives velocity, right?

From what I remember reading about inflation, it’s not something that just happens instantly; it goes through specific stages.

But I was thinking about something else. It's not just about whether prices go up and we call it inflation. For example, if electricity prices spike by 50%, but the money supply (or velocity?) grew by 60%—wouldn't we effectively be looking at deflation?

ps.
When calculating inflation, do they look at *why* prices are rising? Because I doubt they care if food gets more expensive due to monetary policy versus a drought.

Feeling that deja vu all over again? 😂

http://www.bloomberg.com/news/2012-1...dy-s-says.html

vividgull10 said:If I'm following you, money velocity is basically just measuring how fast the cash created by the Federal Reserve moves from banks into the economy through credit. So, you're saying the Federal Reserve controls the money supply while the market drives velocity, right?

From what I remember reading about inflation, it’s not something that just happens instantly; it goes through specific stages.

But I was thinking about something else. It's not just about whether prices go up and we call it inflation. For example, if electricity prices spike by 50%, but the money supply (or velocity?) grew by 60%—wouldn't we effectively be looking at deflation?

ps.
When calculating inflation, do they look at *why* prices are rising? Because I doubt they care if food gets more expensive due to monetary policy versus a drought.

Not quite. It's more about how many times that same dollar changes hands over a certain period. Think about it: I buy something from you for $100, then you take that $100 and buy something from a third person, who buys from a fourth, and so on. That's circulation.
The problem we're seeing now? I buy something from you for $100, but instead of spending it, you just use it to pay down a loan... and boom, the circulation just stops.

Patrick Moore3 said:Not quite. It's more about how many times that same dollar changes hands over a certain period. Think about it: I buy something from you for $100, then you take that $100 and buy something from a third person, who buys from a fourth, and so on. That's circulation.
The problem we're seeing now? I buy something from you for $100, but instead of spending it, you just use it to pay down a loan... and boom, the circulation just stops.

Fair enough. So, basically, new credit issued minus credit repaid, right? Because everything else stays in rotation.

(edit)
Actually, you have to factor in savings too.

The velocity at which capital flows into the market is dictated by interest rates. Right now, the Federal Reserve has rates hovering around ~0%. However, that’s just the supply side; the actual demand for that liquidity is determined by the market itself.

As for inflation or deflation, I suppose it’s impossible to have a meaningful conversation about either because of the bubble. The financial derivatives bubble currently holds about ten times more cash than the real economy actually does, which is why we aren't seeing any real-world inflation. Essentially, the bubble has sucked up all the newly printed money, and then some—it’s even vacuuming up existing liquidity from the market. Consequently, despite the endless money printing, citizens are effectively experiencing deflation.

People aren't seeing any deflation here.
Deflation means your money actually gains purchasing power. Anyone who buys groceries, pays utility bills, or deals with the daily cost of living knows their dollar loses value every single day.

Things are getting pretty interesting right now. The market is betting that $78.60 was the floor for the Dollar, but Ben clearly has other plans. If the Dollar keeps climbing, we’re looking at a stock market dip right before the election hits. It’s basically a showdown: the Federal Reserve against the market, and the Federal Reserve against every other central bank out there. If Ben manages to push the Dollar even lower, gold could slide toward $1,900. If he fails, we might see it drop toward $1,700—maybe even $1,690? I can't recall the last time things were this volatile. I'd say it's a 50/50 toss-up, maybe leaning 60/40 in favor of the Dollar rising.

If all of this holds up, the odds are in Ben's favor.......
( I hope hollowmoose21 is following along? )

http://kingworldnews.com/kingworldne...unced_QE4.html

http://kingworldnews.com/kingworldne..._Huge_Run.html

Anyone who lived through the 1970s will instantly recognize these conditions as stagflation—which is exactly how we described it back then....

“A poor economy and rising prices sharply reduced American standards of living in the 1970s. In fact, the numbers show that when adjusted for inflation and US Dollar debasement, American standards of living, as measured by disposable income, actually peaked in 1973.

Give that some thought, Eric. That was nearly forty years ago. It strikes me as a record—though certainly not one the Federal Reserve wants to highlight. I suspect it is the longest stretch in American history regarding living standards.

Stagflation in the 1970s created an environment that lit a fire under precious metal prices, so seeing gold and silver rally once again isn't particularly surprising.....

quiettrucker12, the Federal Reserve only knows how to do one thing: print paper. This US Dollar strength is just temporary, especially when you compare it to other assets that are also losing value fast. Honestly, the Federal Reserve is basically just racing to see which one can destroy its own currency first.

vividgull10 said:If I'm following you, money velocity is basically just measuring how fast the cash created by the Federal Reserve moves from banks into the economy through credit. So, you're saying the Federal Reserve controls the money supply while the market drives velocity, right?

From what I remember reading about inflation, it’s not something that just happens instantly; it goes through specific stages.

But I was thinking about something else. It's not just about whether prices go up and we call it inflation. For example, if electricity prices spike by 50%, but the money supply (or velocity?) grew by 60%—wouldn't we effectively be looking at deflation?

ps.
When calculating inflation, do they look at *why* prices are rising? Because I doubt they care if food gets more expensive due to monetary policy versus a drought.

No—velocity is the rate at which the money supply circulates through the economy. Currently, a single US Dollar in the US economy turns over about 1.57 times per year (though trends suggest velocity has been slowing down since 2001, if not earlier).

I think Reggie Middleton described this whole deflation vs. inflation dynamic better than anyone else...

If I can track down the specific article, I'll post it....

Anthony Evans78 said:quiettrucker12, the Federal Reserve only knows how to do one thing: print paper. This US Dollar strength is just temporary, especially when you compare it to other assets that are also losing value fast. Honestly, the Federal Reserve is basically just racing to see which one can destroy its own currency first.

That’s all true, and Ben clearly has the biggest printing press, so the US Dollar will just keep sliding... It’ll be interesting to see if he can suppress the US Dollar just enough before the election, especially since he needs those stock prices looking good right now, even though the market is signaling that the US Dollar should actually be climbing a bit.

Trend shifts between currencies—like this attempt to prop up the US Dollar—are going to get slower, more volatile, and much more painful because everyone is printing money. On top of that, everyone is pinning their hopes for this bull market on the fact that nobody can print quite like Ben.

quiettrucker12 said:That’s all true, and Ben clearly has the biggest printing press, so the US Dollar will just keep sliding... It’ll be interesting to see if he can suppress the US Dollar just enough before the election, especially since he needs those stock prices looking good right now, even though the market is signaling that the US Dollar should actually be climbing a bit.

Trend shifts between currencies—like this attempt to prop up the US Dollar—are going to get slower, more volatile, and much more painful because everyone is printing money. On top of that, everyone is pinning their hopes for this bull market on the fact that nobody can print quite like Ben.

Here is how I see things: the Dollar eventually has to find some footing and stabilize, but what really keeps me up at night is gold; seeing it jump by $200 over the summer tells me one thing clearly—the US Dollar is definitely on a downward trajectory.
Has the Euro finally hit its stability point? 🤷The next time the Euro starts shaking, should I just move everything into precious metals?
🤷Given that we’re heading into that pre-holiday madness in about two months—assuming my theory holds that Americans tend to spend like crazy during the holidays—I’m expecting a temporary illusion of recovery and Dollar stabilization; if people start buying again while the Euro is wobbling,
is that enough of a signal for me to pivot to precious metals? 🤷
That would be my cue.

Target $2000, or maybe a correction and stabilization around $1850?
Personally, I’m just waiting for the big buildup before we smash through that psychological $2000 barrier, and I’m really hoping we aren't too far off....

dustyheron5 said:The Federal Reserve controls velocity, so there isn't much direct correlation between them—aside from the fact that central banks monitor velocity to try and balance the two categories. It’s similar to how the Federal Reserve targets nominal GDP...

Right now, we are seeing a collision of forces: deflationary pressures on what citizens hold (labor, real estate, etc.) versus inflationary pressures on essential assets (food, energy, utilities). That is precisely where the conflict between deflationists and inflationists stems from.

For instance, I personally bought a tool for 50% less than usual, yet my electricity and water bills have jumped by 30% (though I have my own well and water source, and don't use gas at all 😍).......

Initially, "easy money" doesn't hit every asset class simultaneously. It trickles through certain sectors first. It could take quite a while before the effects are felt across the entire board.

Back in the late '20s, drilling rigs in Texas really ramped up and pushed oil prices down, eventually landing them just north of $0.60 a barrel by the early '30s. Since oil prices pull everything else along with them—food, utilities, travel costs—we saw deflation hit every single sector during the Great Depression.
Given how much oil production has basically flatlined over the last five years while demand from the East keeps climbing... it's pretty obvious prices are headed up. That means higher food costs, heating bills, utilities, and everything else tied to it.

If the Arab nations decide to turn off the taps (like what happened in Texas in the late '20s) and oil drops back to that $30-$40 range we saw during the 2008-2009 transition... we could see statistical deflation across the board in the medium term, regardless of whatever moves the Federal Reserve tries to make!

That theory about the Arab nations being able to just turn off the oil taps—it’s arguably a bit of a stretch... though I agree with you that the crisis will exert downward pressure on oil prices for a while... however, looking at the longer term:

Dr. Richard Duncan:
In the US, the average piece of food travels nearly 1,500 miles before hitting your plate. A source in Canada notes that the average piece of food is transported 5,000 miles from production to consumption. Source

A recent article published by CNN documented the massive amount of fossil fuel energy required just to produce our food. Emphasis added:
The issue is not one of "running out" so much as it is not having enough to keep our economy running. The ramifications of peak oil for our civilization are similar to the ramifications of dehydration for the human body. The human body is 70 percent water. A 200-pound man, therefore, carries 140 pounds of water. Since water is so vital to every biological function, that man doesn't need to lose all 140 pounds of water weight before dehydration causes him to collapse. Losing as little as 10 to 15 pounds of water might be enough to kill him.

In a similar sense, an oil-based economy like ours doesn't need to drain its entire reserve before the collapse begins. A supply-demand shortfall of just 10 to 15 percent is sufficient to completely shatter an oil-dependent economy and plunge its citizens into poverty.

Production drop effects can be devastating. Source For instance, during the 1970s oil shocks, production shortfalls as low as 5% caused oil prices to nearly quadruple. Source The same thing occurred in California a few years ago with natural gas: a production drop of less than 5% sent prices skyrocketing by 400%.

Fortunately, those specific price shocks were only temporary.

The upcoming oil shocks won't be so fleeting. They represent the beginning of "a new, permanent condition." Source Once the decline starts, production will drop (conservatively) by 3% annually, every single year. Between war, terrorism, extreme weather, and other "above ground" geopolitical issues, the effective decline rate will likely exceed 10% per year—effectively cutting total supply by 50% within seven years. Source

This estimate comes from numerous sources, not the least of which is Dick Cheney himself. During a 1999 speech given while he was still CEO of Halliburton, Cheney stated:

By some estimates, there will be an average of two-percent annual growth in global oil demand over the years ahead, along with, conservatively, a three-percent natural decline in production from existing reserves. That means by 2010 we'll need an additional 50 million barrels per day.

dustyheron5 said:If all of this holds up, the odds are in Ben's favor.......
( I hope hollowmoose21 is following along? )

http://kingworldnews.com/kingworldne...unced_QE4.html

http://kingworldnews.com/kingworldne..._Huge_Run.html

Anyone who lived through the 1970s will instantly recognize these conditions as stagflation—which is exactly how we described it back then....

“A poor economy and rising prices sharply reduced American standards of living in the 1970s. In fact, the numbers show that when adjusted for inflation and US Dollar debasement, American standards of living, as measured by disposable income, actually peaked in 1973.

Give that some thought, Eric. That was nearly forty years ago. It strikes me as a record—though certainly not one the Federal Reserve wants to highlight. I suspect it is the longest stretch in American history regarding living standards.

Stagflation in the 1970s created an environment that lit a fire under precious metal prices, so seeing gold and silver rally once again isn't particularly surprising.....

Watching closely. 😁
The real question is why they announced it this way, and why right now of all times.
And why send out Carli Evans instead of Bernanke himself? 😁 It’s not like the media went crazy over it. Tons of questions, zero answers. 😁
It’s like the Federal Reserve is desperate 😬—trying to tank the US Dollar and pump the stock market again, but some crisis over in Europe or China (http://finance.yahoo.com/news/dollar...040115304.html) keeps messing up their play. 😍

Unfortunately, we aren't seeing any extra production from the Arab states. They simply can't manage it... Ghawar has hit its limit.
If Bernanke had actually said what his buddy implied, gold would have smashed through $1900 instantly, and silver probably would've hit $40.
They aren't just desperate; they're clueless, with nothing left to do but print money. Seen that before.🙂

hollowmoose21 said:Watching closely. 😁
The real question is why they announced it this way, and why right now of all times.
And why send out Carli Evans instead of Bernanke himself? 😁 It’s not like the media went crazy over it. Tons of questions, zero answers. 😁
It’s like the Federal Reserve is desperate 😬—trying to tank the US Dollar and pump the stock market again, but some crisis over in Europe or China (http://finance.yahoo.com/news/dollar...040115304.html) keeps messing up their play. 😍

They are likely trying to balance a falling dollar against a controlled rise in precious metals... all while keeping the S&P 500 steady enough to make the deception easier to swallow.

I am more concerned about what happens after the election; we could see a massive, widespread sell-off then. The actual state of the global real economy is nearing a breaking point—all those assets sitting at 12.😍

You remember what the Singaporean Finance Minister asked during the G20 summit, when everyone was taking turns claiming they would double their exports in the coming years to climb out of the crisis?

"But who is going to import them?" 😂😂

You're right. After the election, we might see a temporary fire sale on everything, including PM.
Of course, you'll have all those pundits claiming the bubble finally burst, which will probably be one of the few chances left to pick up more 😁

As usual, G. E. Griffin hits the nail on the head and explains exactly what's going on.
http://www.youtube.com/watch?v=_WrMW...ploademail-new