# Hyperinflation in US....how will it affect Mexico?



## excelent3

Scenario:

Due to the affects of the American government printing 24/7 trillions of bailout dollars "out of thin air" into the currency system, thus greatly devaluing the dollar, what kind of affect will this have on life in Mexico and on the Peso?


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## sparks

This is your first post ????


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## excelent3

Yes, why would you ask?


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## synthia

Well, I'm more worried about the possibility of deflation, which is much worse long run. When prices are constantly going down, people delay spending, and people get less for what they sell and so don't have money to spend and you have a downward spiraling feedback loop. I don't think you can have hyperinflation if no one is spending money.

In general, anything that happens in America will probably have an exagerrated impact in Mexico. Right now, the peso is at 13.6 to the dollar, after hovering around 10-11 for years.


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## Queretaro

I agree with synthia, this exchange rate (13.5 to the dolar) is great for us expats living in Mexico on the U.S. dolar, but the effect is only going to be enjoyed for the short term. Once the prices in Mexico catch up to the change the poor will really suffer.


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## excelent3

Yes, I would agree....The Feds answer is more debt, more spending, through printing of money "out of thin air".....

The free market no longer exists as the government ( the same people in fact) continues to promote exactly what go us into this mess.

It may take 1-2 years, but this scenario will play itself out...

I am very concerned how this will affect Ex-Pats in Mexico in the future, as I am seriously planning on moving to Guadalajara area. If the dollar is so inflated that it will take $10 to buy a gallon of milk, the leverage (exchange rate) you have now could "pop the balloon." 

How do you feel about this assessment?


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## synthia

That isn't the way it is going. At least for now, most things are essentially at a 30% discount. Even in the US, prices are falling for a lot of things besides gasoline.

I think that the spending programs are the only way to go. Tightening money and letting things just work out is what made the great depression so bad, and that is what we are getting dangerously close to having. I think you are worried about the wrong problem. 

Those of us with reliable incomes that don't require employment and are not going to be cut are going to be relatively well off, while others suffer.


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## excelent3

Synthia, do this for yourself. Do a search on YOUTUBE..."Peter Schiff was Right"
and watch this. I think he is pushing near 1 million hits. I have read both his books....Then tell me what you think. You might gain so new perspective.

Regardless of what happens, I still plan on coming to Mexico. If things get really bad, you can always stay warm, always eat fresh fruits and vegetables, and still get decent health care for much less. The rest doesn't matter


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## Kaye

Hello All, I hope the last post is right about being able to survive in Mexico - depression or whatever, because I'm a semi-retired Canadian from the expensive city of Vancouver who hopes to relocate to Queretaro next October. Our Canadian dollar isn't doing great but I will have a modest, but liveable pension income and also hope to work part-time teaching ESL, which is what I'm doing here now. Am happy to hear about the club for expats in Queretaro. Appreciate everybody's input. Thanks! K.


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## synthia

Mexico is not isolated from the worldwide economic situation. I just saw an article today, here in Merida, about this being an 'austere' Christmas for most of the people on the Yucatan Peninsula. Considering that Quintana Roo is the richest state in Mexico, that isn't encouraging.

I'm in Merida now, and I've been here in the winter before, and the place seems devoid of tourists compared to my experiences in the past. Maybe it is just the pre-Christmas slump.

Everyone tells me that food prices are rising dramatically and that fuel prices have not come down with the fall in the price of oil. That said, I just got a lunch consisting of soup, a huge chicken leg, rice, refried beans, a bit of lettuce and a couple of tomato slices, some pickled vegetables, and salsa and chips for about US$2.50. Eventually prices will even out, but for now, it's pretty good. I don't see any $10 milk in the future. I still think deflation is the thing to fear.

Again, those of us with fixed incomes, that don't have to worry about jobs going away or investments losing value are actually in pretty good shape.


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## Rodrigo84

My American cousin explained the Phillips Curve to me, Phillips curve - Wikipedia, the free encyclopedia to me, but what I see in Mexico is that real estate prices have still not come down. Take a look at sales for homes in Mexico City and they are still asking 6 figures in U.S. dollars for homes in areas that aren't even attractive, meanwhile people's income is declining. I see some movement here with rents coming down and landlords relaxing certain rules. Seems more like we have a bit of what my cousin told me is stagflation, Stagflation - Wikipedia, the free encyclopedia

It seems pretty scary what they say in the first part of that article on stagflation, "The concept is notable partly because, in postwar macroeconomic theory, inflation and recession were regarded as mutually exclusive, and also because stagflation has generally *proven to be difficult and costly to eradicate once it gets started*."


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## excelent3

Deflation for now, inflation is coming, and that is the highest form of taxation. I would be concerned ( to put it mildly) if my income was "fixed" or coming in from an investment. As I stated in my inaugural post, with the Fed printing money "out of thin air", for bail outs and stimulus packages that will never end, it's only matter of time. This is called "quantitative easing", which creates "dollar debasement" = inflation or devaluation of the dollar. Out government keeps promoting debt, borrowing of money, exactly what go us in this mess. The dollar is already heading south......stay tuned. We need to learn how to become savers again, buy only what we can afford, and become a nation that produces, and exports. Meanwhile, there will be some serious pain in this country. It will take years to turn this around. Free markets work best without government interference, and our government is not allowing the free markets to work. What they are promoting is rewarding of failure, most of the key players you are seeing on national nightly news are the same players that go us into this, in my opinion many of them should be put behind bars. Greed on a massive scale.


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## synthia

Stagflation first happened when I was in graduate school. My economic professor rather enjoyed pointing out that our texts insisted that inflation happened only with a growing economy and high employment, when it we had really high inflation right in the middle of a recession. As someone pointed out to me the other day, we really have never been in a situation like this, so economic predictions are particularly unreliable.


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## excelent3

Well said Cynthia....most of these (edited) economic prognosticators on the (edited) media 24/7, haven't a clue. Best thing to do is get as liquid as you can, get out of the dollar as fast as you can, invest in overseas stocks, gold and silver. Gold and silver has gone up almost 20% in the past two weeks and the dollar is starting to tank, and it's going to gain momemtum from here on out, it will be scary by next year. Remember real money is not paper printed out of thin air for bailouts and "stimulus" packages by (edited) Paulson and the Fed, it's gold and silver. $4-5K an ounce in 3-4 years is not unrealistic....


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## synthia

There is no such thing as real money. Money is a concept, and is only as good as faith in it. For that matter, gold and silver have little intrinsic value, and the value of diamonds is artificially managed.


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## excelent3

If Gold and Silver had no intrinsic value, then what does? Paper money or currency????? Maybe you would like to move to Zimbabway, where inflations is running of control, they now have a $5,000,000 note. You and a whole bunch of government economists could use these to start a fire with. For me I'll take the Gold and Silver, which IS the only real money.


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## freeda

I understand what synthia is saying. _Nothing really has "intrinsic" value. It only has the value that we, as a society, agree to place on it. _Our society has agreed that gold, diamonds, cash, etc, have value. Other societies that don't use a monetary system place value on livestock and crops. 

Where I live, there is a value that is associated with home ownership. But my friend from Bulgaria tells me that there, home ownership is for the poor and young adults strive to be able to get an apartment. 

If the whole system crashed today, would I be delighted to have a stash of paper money? Of gold? I'm thinking I'd be more excited to have several pallets of canned food.


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## RVGRINGO

Home ownership, here in Chapala, offers a certain sense of security because taxes and utilities are very low and non-payment of taxes can't result in a sheriff's sale. Of course, the gentle climate is survivable without the need for heat or A/C and that can't be said for many parts of the USA.


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## excelent3

It may come having enough canned goods on hand here in the states....
I agree with RVGringo, but again, what is your take when the dollar lose significant value here in the states, how will this play out for you as far as financial stability? Do you feel that you will be able to remain secure? I can't believe the 13 pesos or even 10 pesos to the dollar can last in the future.


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## RVGRINGO

I wish I had only two things; a larger nest egg and a crystal ball.


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## excelent3

Being and RV dealer of 20+ years, living a great lifestyle until market forces beyond my control eroded my dream to a shell. It seems that most here don't want to address my initial question. I am quite aware that people are distressed. No nest again will hold it's weight vested in US stocks. (edited) One must go with growth and the emerging markets are overseas. It ain"t here. ... Call me Dr. Doom but I am convinced this house of cards will fall and fall hard early in the new administration's (edited) "quantitative easing" until we have no more trees left. 2-3 pesos to the dollar will have to suffice....but it will beat the civil unrest and hardship to be seen here....You won't need a crystal ball and your nest egg may be in serious jeopardy....I saw a great sign on the interstate attached to a backyard fence right after the presedential election....it read " The sheep have spoken, may God save us"......


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## synthia

Most of us have addressed your initial question. We don't believe there is going to be hyperinflation.


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## verdeva

excelent3 said:


> Being and RV dealer of 20+ years, living a great lifestyle until market forces beyond my control eroded my dream to a shell. It seems that most here don't want to address my initial question. I am quite aware that people are distressed. No nest again will hold it's weight vested in US stocks. (edited) One must go with growth and the emerging markets are overseas. It ain"t here. ... Call me Dr. Doom but I am convinced this house of cards will fall and fall hard early in the new administration's (edited) "quantitative easing" until we have no more trees left. 2-3 pesos to the dollar will have to suffice....but it will beat the civil unrest and hardship to be seen here....You won't need a crystal ball and your nest egg may be in serious jeopardy....I saw a great sign on the interstate attached to a backyard fence right after the presedential election....it read " The sheep have spoken, may God save us"......


The Mexican Peso, which is what you pay for goods and services in Mexico (what a surprise!), is not TIED to any currency, including the US dollar. It is valued based upon the perception of stability of the Mexican economy. That isn't to say that the U.S. and Mexico aren't joined-at-the-hip in many areas. 
I believe that what you are concerned about is a "standard of living" that you'd like to enjoy given a fixed amount of monthly income, true? No one, not anywhere is going to be able to give you an iron clad (or silver or gold) guarantee.... about anything. The wife and I live in Mexico solely on our Social Security and we live a very comfortable life. A life that would be IMPOSSIBLE to live north of the border. If for some inexplicable reason the value of our fixed U.S. dollars, which monthly are converted into Pesos, suddenly became worth 50% less (something that in my opinion is not going to happen), we would still survive AND in a much better manner than with the same dollars NOB.
Now, do you have any questions you'd like to ask that don't require a crystal ball?
VerdeVa


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## drblanke

If your main concern is the strength of the peso versus the dollar, I would not be too worried. Like others have said, Mexico is extremely tied to the economy of the US (manufacturing, remittances), and though the peso is not pegged to the dollar, it does track it pretty closely because of that fact. Add to this that Pemex isn't making much on its oil exports these days and the Mexican peso will probably perform worse than the dollar in the future. 

As for the dollar itself, with the Fed putting interest rates at near zero, the only thing saving it is the fact that all the other world economies are in even worse shape--see Iceland or the oil based economies collapsing in Russia, Venezuela, and Iran. The Yen is high, but that just crushes Japanese exports and it will fall. The Euro has put on a rally recently against the dollar, but it is way off its high, and the Pound is near historic lows. Foreign folks are certain that the US Treasury will pay them back, which is all that matters right now.


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## excelent3

Thanks for the posts Verdeva and Dr blanke, I gained some clear perspective. The fact that the Pesos is not pegged to the dollar is crucial. So now I can understand why one may be better off in the event of a dollar meltdown...for more reasons than monetary stability. The one comment made about the Treasury being able to repay our debt is the looming question. I don't believe this is possible, given our own insatiable appetite for debt, particularly in light of the massive amounts of fiat money that is and will continue to be printed 24/7 for bailouts and "stimulus" programs. My own opinion is that this will only exacerbate the problem, and make it much worse over the long haul. Meanwhile, foreign governments may realize we will never be able to repay, add the falling dollar index factor ( from "quantitative easing=inflation) and will no longer borrow to us....that is when life in the US as we know it, could change dramatically, unlike we have never seen in the past....Left to our own devices, while our standard of living greatly diminishes, other emerging economies will prosper. Mexico and other countries may be a great place to be from that stand point.


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## synthia

No one expects that any country will ever pay off its debt. Concerns arise when the country can't pay the interest and can't recycle it. For instance, if the US were unable to sell enough treasuries to pay interest on its debt and pay out the obligations that have matured.

As far as the peso not being tied to the dollar, I think that creates possible problems for retirees in Mexico rather than eliminating them. The peso is now worth 30 percent less than it was six months ago, so those on a fixed dollar income are doing well. If it goes the other way, those on a fixed dollar income will be hurting.

exellent3, I think this is exactly the opposite of what you think the effect will be, though I suppose it depends on whether one has transferred a large sum to Mexico or are living off of a fixed dollar income. If, as most people are, you are living off a fixed dollar income, and the peso would remain strong while the dollar tanked, you would be in really bad shape. 

If the peso were tied to the dollar, or if Mexico used the dollar, the rise and fall would have relatively little direct effect.


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## excelent3

No one expects that any country will ever pay off its debt. Concerns arise when the country can't pay the interest and can't recycle it. For instance, if the US were unable to sell enough treasuries to pay interest on its debt and pay out the obligations that have matured.

As far as the peso not being tied to the dollar, I think that creates possible problems for retirees in Mexico rather than eliminating them. The peso is now worth 30 percent less than it was six months ago, so those on a fixed dollar income are doing well. If it goes the other way, those on a fixed dollar income will be hurting.

If I understand what you are saying here, _I totally agree with you_. Right now the dollar is strong, about 13 Pesos to $1....if the dollar tanks, it will spell trouble for most Ex-Pats, and this has been my concern, ( I believe the dollar will tank), in fact the dollar index is already showing signs of weakening. 

exellent3, I think this is exactly the opposite of what you think the effect will be, though I suppose it depends on whether one has transferred a large sum to Mexico or are living off of a fixed dollar income. If, as most people are, you are living off a fixed dollar income, and the peso would remain strong while the dollar tanked, you would be in really bad shape.

Again, I agree, and that has been my concern all along. The purchasing power that so many have been used to may diminish significantly. Of course all this may be happening just when I want to move to Mexico!....But I also agree with another post on this forum, even if the dollar tanks by 50%, you will still be better of in Mexico then in the states regarding quality of life, etc....Only time will tell.

If the peso were tied to the dollar, or if Mexico used the dollar, the rise and fall would have relatively little direct effect.


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## freeda

This reinforces our instinct to maintain affordable lifestyles on BOTH sides of the border. I think that will allow us maximum flexibility to deal with the changing times. God willing.

"Quality of life" can be found anywhere. You just have to choose it. For some, their idea of quality of life includes mass quantities of snow!!


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## Rodrigo84

The thing with Mexico that I know is different from the US, is that the US is largely a credit-base society. In Mexico, you only see that so much. My American cousin learned to live in a Mexican manner when he came down here many years ago and when he went home, he kept that approach. He learned to live not on credit, but with he had and earned and it was very tough.

My father often told me that when there is an economic crisis in Mexico is means that the rich have lost money, because for the poor, their hardship has long been a way of life. I remember a few years ago when Antonio Manuel Lopez Obrador was running for President (there are many opinions of him I know) said something probably very much correct, "50% of the population lives on $5 USD or less per day).

Near where my cousin used to live in Interlomas in Huixquilucan, Estado de Mexico there are a lot of apartment buildings there that sit largely empty looking for people to rent or purchase and at some insane amounts, like mid 6 figures in USD for purchase or even in the case of rentals, $1500 USD or higher, though some people have gotten with it and lowered their prices. Same is true of homes all across Mexico City, people want 6 figures or more and often in some pretty awful locations. They are dreaming.

My cousin still has some Mexican friends who claim they are now 'middle class' if such a word exists Mexican society because they now have access to credit. But my cousin noted these people are putting the bare minimum down on their monthly payments and have the attitude that he noted some of his American friends would have, "eventually will hit it big and we'll pay everything back." I see the same issue with housing here that exists in the U.S. A lot of supply and very little demand. And what supply there is...it's actually quite expensive. Trying to find something affordable here on under $20,000 USD or more realistically $10,000 USD and you'll see how difficult it is.


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## freeda

It's not hard to find a 3 bedroom city lot home here in Kalamazoo for under 20K usd. And if your kids go to school here, the Kalamazoo Promise gives them free tuition for college!

Not everywhere is mega-millions-ville. You can do it. We live more "middle of the road" in a 150K home on an acre in the suburbs, but that's a choice, like any other.


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## excelent3

Rodrigo 84-

Your represent the reality for most, not the very senior fat cats I saw (literally grazing) in Ajijic/ Lake Chapala. I intend to fully immerse myself into the fiber of the community where I chose to live in Zapopan, learn Spanish for the next 4 years or so, and try not to appear to much as a tourista. I think I can put together a nice abode for myself as a single for $1500 a month an be very comfortable, and come back to the states for the summer months. That is my goal God willing.


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## synthia

I think the critical thing is to make your decisions and set up your lifestyle so that you are living well below your means or have sufficient cash reserves to supplement your income if necessary. If you even do what would be fairly conservative in the US, and live at the level of your income, you can get in trouble easily.


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## jamie

Of course gold has intrinsic value. It is rare. It is very difficult to find and mine economically. All the gold ever mined is mostly still around and fits into around 100ft sq. Besides being rare it has numerous attributes that nothing else has.

I have spent almost all my working life trying to find an economic gold deposit. In 40 years I have been involved with one property that actually turned into a mine. And that was short lived. 

Gold has been accepted and used for thousands of years as money. Governments don't like that because they can't tax and spend and have wars as well on a gold standard. Or control people as well. 

The person who said I'd rather have canned goods than gold is half right. Although silver is probably a better bet. 


Silver is much the same. If silver has no value then why are people buying junk silver? The Romans had silver coins until the government starting debasing the coinage to pay for the empire. The empire collapsed because they couldn't pay for it anymore. Sound familiar? Or is there just enough hubris and ignorance for people to think this can' t happen? Probably. A Roman poet once said " the glories of Rome are as stars in the sky" ten years later the barbarians sacked Rome. 

Paper money is fiat money based on nothing tangible except faith. Paper money truly has no intrinsic value. There are so many examples that one would have to be blind not to see. Or delusional, a common state. If you believe in the U.S. government or any government then good luck to you. I hope it works out for you. 


The Mexican Libertad is an attempt to get a one oz silver coin into circulation. 

The U.S. government has a deficit of 11 trillion dollars. The real figure is more like 100 trillion. There is no way that this will end well no matter how much babbling there is about hope and change. This doesn't take into account two disastrous wars and all the promises, usually called entitlements that the U.S. can't possibly ever pay for. 

Mexico is the first or second biggest U.S. trading partner. The pentagon is forecasting that Mexico will be a failed state. 

The treatment of illegals in the U.S. will get worse and it's already bad. Many are voluntarily returning to Mexico. Think these people are full of happiness and regard for the North Americans? 

The remisas to Mexico from the U.S. have dropped a huge amount. This will get worse. 

I think foreigners in Mexico should best read some history. There is a burned out villa in Batopilas that might give you a clue. 

I think the people on this board really aren't paying attention. Or if they are they are ignoring reality. Which is a normal human reaction. 

I think we're in for a Black Swan event of very large proportion. Of course anything can happen. So keep those blinders on, it may work out for you after all.


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## excelent3

This last post should open a few eyes. I think some are starting to realize that the future of our grand children has been sold off, and more of the same is coming....at a faster pace. Foreign stocks in emerging economies, Gold, and Silver is where your future stability lies...in other words get out of the US Dollar as fast as you can, get as liquid as possible* NOW*.


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## ezgoing

one would think that Mexico is reliant on oil pricing structures and as long as those fall so does their ability to subsidize their social programs and require higher costs for services and benefits previously subsidized which translate into higher costs to consumers because of the dependence on those subsidies.. Their boom and bust cycles would seem to follow oil prices more than credit markets .. but the value of the peso is tied to world indicators and as such their trade balances with USA & Canada are in dollars or CDN's and are greatly affected by the valuations of these...I would be more worried of civil unrest than the price of milk because people who lack opportunity are inclined to invent it and unfortunately as is often the case mischief and crime are often escalated during those periods... Let's not ignore the high amount of dollars- USA & CDN that were being pumped into rural towns and communities that may suffer greatly until things balance out... How does the old saying go... the US & Canada sneeze and Mexico gets the cold... sad but true and without a reasonable tax system this equates to passing on taxes to goods and services in order to receive maximum benefits immediately...


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## synthia

jamie, gold nor any other standard of exchange has any intrinsic value. Nothing is worth more than what people believe it is worth. If it had an intrinsic value, it wouldn't fluctuate so much. I've seen gold go over $800 and then fall back into the $200 range, hover around $300, go up over $1000, and start back down again. All of these fluctuations are a function, not of any intrinsic value, but peoples' fears about economic and political situations.


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## jamie

synthia said:


> jamie, gold nor any other standard of exchange has any intrinsic value. Nothing is worth more than what people believe it is worth. If it had an intrinsic value, it wouldn't fluctuate so much. I've seen gold go over $800 and then fall back into the $200 range, hover around $300, go up over $1000, and start back down again. All of these fluctuations are a function, not of any intrinsic value, but peoples' fears about economic and political situations.




Gold is real money; a true store of wealth. Very few people have the ability to survive on their own and many have nothing to trade in return for the things needed to survive so some form of money is needed. As we have witnessed throughout history every fiat currency ever created has gone the way of the dinosaurs. This is what we are now seeing happen to the US dollar. Take the “Crash Course” and if you just want to view the section on money, you can see how a PhD in economics explains it.

http://www.chrismartenson.com/crashcours...

Edit: In response to your new question - “Can anyone say WHY it is "the pure currency" or why it has value?”

If you would have watched the section titled “Money” in the link I provided you would have your answer. Do you know what a fiat currency is? It’s that crap you carry around in your wallet that was printed into existence and is backed by nothing tangible. It takes a lot of human labor to discover, mine, refine, transport, and store gold. Gold is a limited commodity.

The “Fed” creates money out of thin air with the push of a few buttons on a keyboard. Their fiat money didn’t require any blood, sweat, or tears to create. It’s easy to debase fiat currency. It’s impossible to debase gold.

Money is necessary in a world where barter would be cumbersome to the point of impossible because there are too many people and we all live too far apart.

What, in your opinion is “pure currency” if not something that fulfills these requirements”

1 – A store of value
2 – A medium of exchange
3 – A unit of account
4 - A claim on human labor.

Your original question was: What value does gold have other than what we say it has?

Let me ask you this: What value does your fiat dollar have other than what we say it has?

You also say: What I see are people buying gold out of fear, not out of love of the metal.

Sure people are buying gold out of fear. People need money and the crap in their wallets, purses, bank accounts, 401K’s, and everywhere else is being debased to the point where it stands a very strong chance of becoming worthless in the very near future.

Do you see people buying fiat currency out of love for the metal or the paper?

* 3 months ago


I am not really a gold bug in the classic sense but anyone who compares gold to fiat money and basically says they are the same is off base and deluded. Of course gold rises and falls but for some reason you could always buy a suit with an oz. of gold at any time in u.s. history. For example and these figures are only an example in 1900 a acceptable suit cost say 10$, an oz of gold could more than buy a suit. The last time I bought an acceptable suit it cost around 500usd, which was about what an oz of gold was then. Are you able to see what this means? I also think that the gold market is manipulated by governments and government banks. It is in their interest, as I said, to have fiat currency.

I also stated or implied that times aren't normal. Naturally many people don't agree. And that's fine. We shall certainly see.


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## jamie

On the other hand we have this, written by Gary North


Some people speak of the intrinsic value of gold. Whenever you hear anyone say this, you can know for sure that you are dealing with someone who knows nothing about economic theory. There is no such thing as intrinsic value. There is only imputed value. There can be historic value, but this historic value is based on long periods of time in which people have imputed value to a particular good or service. There is no intrinsic value, meaning a fixed market price, for any commodity. Commodities are valuable only in so far as the output of commodities is valuable. This was a fundamental insight of the founder of Austrian School economics, Carl Menger. 


If that is what you mean by intrinsic value then I would agree. Markets being what they are. However I stand on the real value of gold vs. fiat currency. There are many historical examples, Zimbabwe, weimar germany, argentina, bolivia just to name a few.


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## jamie

On the other hand we have this, written by Gary North


Some people speak of the intrinsic value of gold. Whenever you hear anyone say this, you can know for sure that you are dealing with someone who knows nothing about economic theory. There is no such thing as intrinsic value. There is only imputed value. There can be historic value, but this historic value is based on long periods of time in which people have imputed value to a particular good or service. There is no intrinsic value, meaning a fixed market price, for any commodity. Commodities are valuable only in so far as the output of commodities is valuable. This was a fundamental insight of the founder of Austrian School economics, Carl Menger. 


If that is what you mean by intrinsic value then I would agree. Markets being what they are. However I stand on the real value of gold vs. fiat currency. There are many historical examples, Zimbabwe, weimar germany, argentina, bolivia just to name a few.


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## excelent3

*Gold is the only TRUE Money*

Give it time, and you will realize that Gold and Silver will be the mainstay again. We need to get back on the Gold Standard. How much fake money do you think the Fed can print before we dilute the dollar to oblivion? 1-2 years and you will see that the new administrations policies will have failed, we will be suffering from hyperinflation never seen before. Printing presses of "Stimulus" running 24/7, trees can't grow fast enough to keep up. Governments are already hoarding gold, and the Federal Mint cannot create new Gold Dollars fast enough... Yes, it is volatile right now, and will be for the time being. Once emerging foreign government's who have citizens that actually save money, and practice producing/exporting (unlike the US) such as China stop buying our debt, we are in trouble. This is already underway. China is engaging in economic warfare as we speak, as they know we are woefully weak... When the dollar index crashes over the next 1-2 years, and your paper money is worthless, Gold & Silver will be real money again......Oh, but, but, that can't happen here. Did you know you are in the money business already? All Americans are now. The banking industry is supposed to understand financial responsibility. But YOU are now part owner because of the policies of the current administration, and this is just the opening act.....it gets better. You have no choice now but to watch bailout after bailout occur, and in some cases multiple bailouts to the same companies, and it all comes out of your pocket. Meanwhile the arm of greed still functions as no reasonable accountability is taking place. Your grandchildren's future has been sold. 



synthia said:


> jamie, gold nor any other standard of exchange has any intrinsic value. Nothing is worth more than what people believe it is worth. If it had an intrinsic value, it wouldn't fluctuate so much. I've seen gold go over $800 and then fall back into the $200 range, hover around $300, go up over $1000, and start back down again. All of these fluctuations are a function, not of any intrinsic value, but peoples' fears about economic and political situations.


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## synthia

jamie - exactly. Nothing is worth anything unless people think it is worth something.


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## jamie

synthia said:


> jamie - exactly. Nothing is worth anything unless people think it is worth something.



Well synthia you completely missed the point. But that's ok. Hope it works out for you.


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## DanMay

How do logistically plan on living with no paper currency ? How will you safe keep you gold and silver holdings ? Will you transact with bullion direct, or covert it to some currency in small amounts as needed ? Will you keep the bulk of your precious metal holdings in the US or Mexico ?


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## jamie

DanMay said:


> How do logistically plan on living with no paper currency ? How will you safe keep you gold and silver holdings ? Will you transact with bullion direct, or covert it to some currency in small amounts as needed ? Will you keep the bulk of your precious metal holdings in the US or Mexico ?



Clearly no one will live without paper currency until the paper currency is worthless, should that occur. It is up to you to keep safe whatever assets you have. It isn't clear yet exactly what will happen but I imagine markets will eventually develop, as they already have to some extent. Generally private hard money exchangers such as e gold have been destroyed by the feds. They don't like competition. It remains to be seen if they can continue that.

I wouldn't suggest Mexico for keeping anything of value at the present time. 

Read up on 4GW for what is happening in Mexico. There is a reason (beyond the military-industrial complex need to create enemies) for Mexico being looked at as a potential failed state. Or read, Brave New War by John Robb. Or any of the theorists on 4 and 5GW. 

I have no idea what will happen but the figures and facts seem to point in a certain direction. Magical thinking and ignorance isn't the way I want to look at the situation. 





The fed has resumed its incredible expansion of the monetary base, aka M0, hot money.

After taking a break November 19 - December 3 (Do banksters celebrate the Thanksgiving holiday?) the digital equivalent of the printing press created another 189 gigaFRNs between December 4 and December 17. That's 156 kiloFRNs per second, 24x7, for two weeks. It took just over 6 seconds to create another million "dollars."

What's more, and much worse, the leaky dam the Fed has erected in an attempt to keep all this new money from pouring into the wider economy is now leaking badly. A high rate of inflation is virtually guaranteed sometime in mid-2009. The broadest measure of the money supply is M3, the narrowest is M0. M3 is no longer reported by the fed (Do banksters feel shame?) but John Williams at Shadowstats.com tracks it. The annualized rate of M3 growth for the last four weeks has been an astonishing 38%. If this trend persists, and there is little reason to think it won't, money creation will soon reach the highest level in the sordid history of the fed.

This is extremely bad news even at a time where bad news comes in floods. The fed will ruin us all in its futile attempt to prop up a failed, immoral, and utterly corrupt financial system.


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## excelent3

"The fed will ruin us all in its futile attempt to prop up a failed, immoral, and utterly corrupt financial system. "

I could not have said it better myself....

This house of cards has no chance. You might be able to use your paper dollars for insulation or to start your campfire with in a few years.


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## NORMY

excelent3 said:


> Synthia, do this for yourself. Do a search on YOUTUBE..."Peter Schiff was Right"
> and watch this. I think he is pushing near 1 million hits. I have read both his books....Then tell me what you think. You might gain so new perspective.
> 
> Regardless of what happens, I still plan on coming to Mexico. If things get really bad, you can always stay warm, always eat fresh fruits and vegetables, and still get decent health care for much less. The rest doesn't matter


I'm still learning, Y mexico instead of say, Thailand. Besides being close, what does Mexico have that Thailand doesn't. I'm not looking to argue but simply gaining knowledge from those who no more than me


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## goingglobal

excelent3 said:


> Scenario:
> 
> Due to the affects of the American government printing 24/7 trillions of bailout dollars "out of thin air" into the currency system, thus greatly devaluing the dollar, what kind of affect will this have on life in Mexico and on the Peso?


Could you be a little more specific please.


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## Kaye

I, too, would appreciate an 'understandable' reply to that question of how this all will affect the peso. That is 'the bottom line', isn't it - for those of us hoping to retire in Mexico? I'm appreciating and learning from the dialogue on this thread. Thanks!


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## goingglobal

*Prices? Catch up?*

Not a chance. This is a once in a generation thing.


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## RVGRINGO

We would all need a crystal ball to answer that question. At the moment, the peso is at almost 14 to the US dollar. Just a few months ago, it was only 10 to the dollar. So, we're getting a bonus on our US retirement dollar for the moment but there are those who think the dollar is peaking and may even collapse. It is anybody's guess right now and we all expect a long and bumpy ride as the world's economies sort themselves out. It won't be fun, no matter where you are. Prices will be volatile, jobs scarse and wages lower.


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## goingglobal

Just watch. 14.5 by the end of Feb and 14.9 or more come June . Oh My...Also, some of you people should not be allowed anywhere near money.


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## excelent3

GoingGlobal - Are you saying the dollar index will be pushing 90, it's been at 85 for the past few weeks now....of course this is bad for the Peso. It can't last. When foreign government stop buying are toxic assets ( already underway) the dollar will plummet. Late 09 into 2010 the "hyperinflation" will be underway, which cause rising prices and higher interest rates. The current administration will incur the rath it so richly deserves. We are now watching the Titanic heading for the inevitable.....and yet the lemmings will continue to follow those that spread Stimulitis.


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## synthia

I'm pretty sure that what I learned in economics was that monetary value is determined by what a willing seller and a willing buyer agree on. Gold is valuable as long a people are willing to pay a lot of money for it. That applies to everything. Therefore it has no intrinsic value. I've been in places in Zaire (now the Congo) where money was useless, and gold would have been, too. What was valuable was empty coffee cans with plastic lids. That was what we used to buy vegetables as we traveled through.


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## goingglobal

excelent3 said:


> GoingGlobal - Are you saying the dollar index will be pushing 90, it's been at 85 for the past few weeks now....of course this is bad for the Peso. It can't last. When foreign government stop buying are toxic assets ( already underway) the dollar will plummet. Late 09 into 2010 the "hyperinflation" will be underway, which cause rising prices and higher interest rates. The current administration will incur the rath it so richly deserves. We are now watching the Titanic heading for the inevitable.....and yet the lemmings will continue to follow those that spread Stimulitis.


You are close to being right on the mark, IMO, just MO. The people in Hong Kong and others like Luxembourg are keenly aware of what you call 'toxic' assets, when there are no longer of interest for purchase, then all hell can break loose, but that takes time. And there are many early warning signals. But if the new people in the States have what is needed they can soften the blow. But the blow is coming, none the less. Stay tuned.


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## jamie

synthia said:


> I'm pretty sure that what I learned in economics was that monetary value is determined by what a willing seller and a willing buyer agree on. Gold is valuable as long a people are willing to pay a lot of money for it. That applies to everything. Therefore it has no intrinsic value. I've been in places in Zaire (now the Congo) where money was useless, and gold would have been, too. What was valuable was empty coffee cans with plastic lids. That was what we used to buy vegetables as we traveled through.



Of course there are situations where gold has no value, to a man dying of thirst in the desert,etc. but this isn't what I'm talking about. 


The following is from a guy who lived through the economic collapse in Argentina in 2001. He is Argentinian and so of course his English isn't great, but more than adequate to convey his meaning. 



GOLD!!

Someone hit me in the head please because I messed up about the gold issue.
Everyone wants to buy gold! “I buy gold. Pay cash” signs are everywhere, even on TV! I can’t believe I’m that silly! I just didn’t relate it to what I read here because they deal with junk gold, like jewelry, either stolen or sold because they needed the money, not the gold coins that you guys talk about. No one pays for the true value of the stuff, so big WARNING! Sign on people that are buying gold coins. Since it is impossible to determine the true mineral percentage of gold, small shops and dealers will pay for it as regular jewelry gold. What I would do if I were you: Besides gold coins, buy a lot of small gold rings and other jewelry. They should be less expensive than gold coins, and if the SHTF bad, you’ll not be loosing money, selling premium quality gold coins for the price of junk gold. If I could travel back in time, I’d buy a small bag worth of gold rings.
Small time thieves will snatch gold chains right out of your neck and sell them at these small dealers found everywhere. This is VERY common at train stations, subways and other crowded areas.

So, my advice, if you are preparing for a small economical crisis, gold coins make sense. You will keep the value of the stuff and be able to sell it for its actual cost to gold dealers or maybe other survivalists that know the true value of the item. In my case, gold coins would have been an excellent investment, saving me from loosing money when the local economy crashed. Even though things are bad, I can go to a bank down town and get paid for what a gold coin is truly worth, same goes for pure silver. But where I live, in my local are small time dealers will only pay you the value of junk gold, no matter what kind of gold you have. So, I’d have to say that if TSHTF bad, gold jewelry is a better trade item than gold coins. Forgive me for not talking about this before, but I didn’t realize this until today, when I visited my local market warehouse and saw a “Buy Gold” sign.

PART III: GUNS, AMMO AND OTHER GEAR

After TSHTF in 2001, only the most narrow minded, brain washed, butterfly IQ level idiots believed that the police would protect them from the crime wave that followed the collapse of our economy. A lot of people that could have been considered antigun before, ran to the gun shops, seeking advise on how to defend themselves and their families. They would buy a 38 revolver, a box of ammo, and leave it in the closet, probably believing that it would magically protect them from intruders.

Oh, maybe you don’t think that firearms are really necessary or your beliefs do not allow you to buy a tool designed to kill people. So you probably ask yourself, is a gun really necessary when TSHTF? Will it truly make a difference? Having gone through a shtf scenario myself, total economical collapse in the year 2001, and still dealing with the consequences, 5 years later, I feel I can answer that question. YES, you need a gun, pepper spray, a machete, a battle axe, club with a rusty nail sticking out of it, or whatever weapon you can get hold of.


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## goingglobal

jamie said:


> The following is from a guy who lived through the economic collapse in Argentina in 2001. He is Argentinian and so of course his English isn't great, but more than adequate to convey his meaning.
> 
> 
> 
> GOLD!!
> 
> Someone hit me in the head please because I messed up about the gold issue.
> Everyone wants to buy gold! “I buy gold. Pay cash” signs are everywhere, even on TV! I can’t believe I’m that silly! I just didn’t relate it to what I read here because they deal with junk gold, like jewelry, either stolen or sold because they needed the money, not the gold coins that you guys talk about. No one pays for the true value of the stuff, so big WARNING! Sign on people that are buying gold coins. Since it is impossible to determine the true mineral percentage of gold, small shops and dealers will pay for it as regular jewelry gold. What I would do if I were you: Besides gold coins, buy a lot of small gold rings and other jewelry. They should be less expensive than gold coins, and if the SHTF bad, you’ll not be loosing money, selling premium quality gold coins for the price of junk gold. If I could travel back in time, I’d buy a small bag worth of gold rings.
> Small time thieves will snatch gold chains right out of your neck and sell them at these small dealers found everywhere. This is VERY common at train stations, subways and other crowded areas.
> 
> So, my advice, if you are preparing for a small economical crisis, gold coins make sense. You will keep the value of the stuff and be able to sell it for its actual cost to gold dealers or maybe other survivalists that know the true value of the item. In my case, gold coins would have been an excellent investment, saving me from loosing money when the local economy crashed. Even though things are bad, I can go to a bank down town and get paid for what a gold coin is truly worth, same goes for pure silver. But where I live, in my local are small time dealers will only pay you the value of junk gold, no matter what kind of gold you have. So, I’d have to say that if TSHTF bad, gold jewelry is a better trade item than gold coins. Forgive me for not talking about this before, but I didn’t realize this until today, when I visited my local market warehouse and saw a “Buy Gold” sign.
> 
> PART III: GUNS, AMMO AND OTHER GEAR
> 
> After TSHTF in 2001, only the most narrow minded, brain washed, butterfly IQ level idiots believed that the police would protect them from the crime wave that followed the collapse of our economy. A lot of people that could have been considered antigun before, ran to the gun shops, seeking advise on how to defend themselves and their families. They would buy a 38 revolver, a box of ammo, and leave it in the closet, probably believing that it would magically protect them from intruders.
> 
> Oh, maybe you don’t think that firearms are really necessary or your beliefs do not allow you to buy a tool designed to kill people. So you probably ask yourself, is a gun really necessary when TSHTF? Will it truly make a difference? Having gone through a shtf scenario myself, total economical collapse in the year 2001, and still dealing with the consequences, 5 years later, I feel I can answer that question. YES, you need a gun, pepper spray, a machete, a battle axe, club with a rusty nail sticking out of it, or whatever weapon you can get hold of.



Gold can gather cobwebs. But, IMO, properly placed currency is the best instrument, hands down. It is always moving somewhere in the world. Always. And you don't have to polish it. Now, if you want the winner on Sunday, it'll cost you.


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## goingglobal

excelent3 said:


> GoingGlobal - Are you saying the dollar index will be pushing 90, it's been at 85 for the past few weeks now....of course this is bad for the Peso. It can't last. When foreign government stop buying are toxic assets ( already underway) the dollar will plummet. Late 09 into 2010 the "hyperinflation" will be underway, which cause rising prices and higher interest rates. The current administration will incur the rath it so richly deserves. We are now watching the Titanic heading for the inevitable.....and yet the lemmings will continue to follow those that spread Stimulitis.


You sound sharp. When you say ''it can't last'', what is that in referrence to? Just to swap ideas, if you will. This peso thing, I have put more study into since I started trading about 18 years ago. My thinking might be getting stuck. So, a fresh perspective is always welcome.

By summer I see a ''Bliuelight Special''---Mexican pesos, buy 2 get 1 free.


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## excelent3

What I meant was the dollar index will not stay this high much longer, ....once the dollar starts dropping the Peso should gain strength. Good for the locals, bad for the Ex-Pats...


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## jamie

excelent3 said:


> What I meant was the dollar index will not stay this high much longer, ....once the dollar starts dropping the Peso should gain strength. Good for the locals, bad for the Ex-Pats...


I can see that we are talking about two very different things. Mexico and the u.s. are linked. If the usd goes down so will the peso. There would be some hope for Mexico if the Libertad was put into circulation, but I don't think they'll do that until it's all over anyway. So with this I'll give it a pass.

What are the elements and factors for hyperinflation? Under IAS 29.3 the four factors are (1) the general population flees the local currency, (2) dual currency pricing is practiced, (3) prices for purchases on credit incorporate the loss of purchasing power and (4) the cumulative inflation rate over three years approaches, or exceeds, 100%.

First, under IAS 29.3 “the general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power.” Under 31 U.S.C. 5112 the Mint is required to provide ‘in quantities sufficient to meet public demand’ gold and silver coins. Due to exceptional demand and contrary to federal law the United States Mint has suspended both gold and silver coin sales. It appears a significant amount of the United States general population is demanding the inflation hedge currencies, gold and silver, in large amounts. Therefore, it appears this first factor is met.

Second, under IAS 29.3 “the general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that currency.” In New York some merchants have begun pricing in and accepting other currencies. An article in February 2008 reported that “We had decided that money is money and we’ll take it and just do the exchange whenever we can with our bank, … We didn’t realize we would take so much in and there were that many people traveling or having euros to bring in. But some days, you’d be surprised at how many euros you get.” Robert Chu, owner of East Village Wines, told Reuters television. Gas station owner Gary Mallicoat accepts silver quarters. While the practice of pricing and accepting alternative currencies does not appear widespread among the general population the trend is starting.

Third, under IAS 29.3 “sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short.” One of the easiest ways for businesses to compensate for the loss of purchasing power through the use of credit is to stop extending credit and require cash.

This steep decline in the rate of growth of M3 has likely resulted from lines of credit being tapped out when the credit crisis began, lines of credit being revoked and an unwillingness or inability to borrow or extend credit. Therefore, it appears that, indirectly, the price of both sales and purchases are being modified to compensate for the expected loss of purchasing power of the US$.

Fourth, under IAS 29.3 “the cumulative inflation rate over three years approaches, or exceeds, 100%.” Because central banks have a conflict of interest and often shroud their operations in secrecy the use of their official numbers are unreliable. The only reliable currency is gold. It is subject to only exchange-rate risk and there are large amounts of above ground stockpiles indicating its primary use as money. Therefore, the relative price of national currencies and gold, absent central bank manipulation to the downside, should be a reliable indicator of the national currency’s inflation rate because of the purchasing power difference.

The average price of gold in:

2004 - $409.72

2005 - $444.74

2006 - $603.46

2007 - $695.39

2008 - $912.90 (Jan-Aug)

Thus the ‘inflation rate’ of the US$, relative to gold, is:

2005 - 8.5%

2006 - 35.7%

2007 - 15.2%

2008 - 31.3% (Jan-Aug 2008)

The cumulative inflation rate from the 2005 average price of $444.74 to the 2008 average price of $912.90 equates to a rate of 105.3%. Because 105.3% approaches and exceeds the 100% required by IAS 29 therefore the inflation rate of the US$ relative to the stable and reliable currency of gold indicates hyperinflation. Additionally, the general commodity index has had similar triple digit changes.

CONCLUSION

Because of the flight from the US$ by a large segment of the population of the United States, the pricing of goods and services in foreign and metal currencies, changes in credit terms to account for purchasing power differences and a cumulative three year inflation rate of 105.3% therefore with gold as the base currency the US$ appears to be in a hyperflationary environment when applying IAS 29.

If you are a CEO or CFO of a publicly traded company subject to SOX you may want to consult your general counsel and auditors concerning this issue. I doubt I need to remind you that ‘penalties for violations of to up to $25 million dollars and up to 20 years in prison.’ Better to be safe than sorry.

As evidenced with the Weimar experience the rate of inflation rapidly accelerates. Like a jet engine the faster it goes the faster it goes.


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## jamie

goingglobal said:


> Gold can gather cobwebs. But, IMO, properly placed currency is the best instrument, hands down. It is always moving somewhere in the world. Always. And you don't have to polish it. Now, if you want the winner on Sunday, it'll cost you.





Yes, gold gathering cobwebs is conventional thinking. I don't think these are conventional times. We shall see, of course. 

You don't have to polish gold, it never loses it's luster. 

Winner of what? The world cup?


The Internet pulls back the curtain and reveals the illusions rapidly resulting in the loss of misplaced confidence. We are living through historic times and are at the cusp of a turning of the tides. The inflationary credit contraction that started before the 13th century and the Medici with their fractional reserve banking has reached its zenith and the deflationary credit contraction, like a Kondratieff Winter, has begun. For those with a stake in illusionary currency and fractional reserve banking as Mr. Volcker succinctly phrased it, ‘This current mother of all crises.’

In but a few short years the Internet has radically altered the monopoly of money, money substitutes, illusions and currency just like it has altered the smaller monopolies of music, movies, communications and journalism. Digital gold currencies, 100% reserve banking based on commodity money, are exploding onto the scene through the viral nature of the Internet and these monetary evolutions are forever altering the path of humanity.

This creative destruction will probably result in as Niall Ferguson phrased it in The Ascent of Money, ‘mass extinction’ of the barbarous relics of illusion currency, fractional reserve banking, central banking and their pets the giant Welfare/Warfare States. How long this process of creatively destroying a 600 year old monetary system will take is anyone’s guess but it is happening a whole lot faster than many expect. As the velocity of digital gold currencies continues increasing and the velocity of FRN$ and other illusion currencies decrease the faster this currency transfusion for the global economy will take place.


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## synthia

The saying is that when the US gets a cough, Mexico gets a cold. Well, the US has at least a very bad cold, so Mexico may be coming down with pneumonia. There was an article the other day that for the first time in history, remittances from Mexicans living abroad were down for 2008. Since that is Mexico's second largest source of income after oil, and oil is down too, the problem may lie in the Mexican economy, and a crash in the dollar may result in a bigger crash of the peso, making the dollar still rise against the peso even if it falls against stronger currencies.


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## excelent3

Jamie-

Nice copy and paste from "US Dollar in Hyperinflation" ?

by Trace Mayer, J.D.

US Dollar in Hyperinflation | RunToGold.com


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## excelent3

For those that doubt that Gold has no "intrinsic" value, do you still feel it is worth the risk to hedge on "currency" ? ...... Check out the currency of Zimbabwe lately? We are headed in the same direction......


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## jamie

excelent3 said:


> Jamie-
> 
> Nice copy and paste from "US Dollar in Hyperinflation" ?
> 
> by Trace Mayer, J.D.
> 
> US Dollar in Hyperinflation | RunToGold.com


of course it's not my work. I would think that was clear. Although I definitely should have done attribution for all the copy and paste that I did. And was ready to do so. It's just that there really isn't much interest in the message. So it seemed kind of pointless and I took the easier way. Shouldn't have.


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## excelent3

Well intended. Regardless, _very informative_....and a benefit to many...Just as sure as the banks are stupid enough to lend me money at 2.5% on my home equity, I bought more Gold today while they are still taking currency!


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## goingglobal

*Zimbabwe?*



excelent3 said:


> For those that doubt that Gold has no "intrinsic" value, do you still feel it is worth the risk to hedge on "currency" ? ...... Check out the currency of Zimbabwe lately? We are headed in the same direction......


Not what I'd call a major player.


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## goingglobal

So many buzz words, so much nonsense. Debt is a good thing,btw.


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## synthia

Right now the peso continues to fall against the dollar, while the dollar continues to fall dramatically against the yen, and has lost a bit against the euro and pound.

And I just looked up 'intrinsic value' as a financial term. It applies to companies, stocks, and stock options. I couldn't find anything for commodiites. All the definitions pointed out that it can vary widely as it is based on values which are estimated rather than known, except debt. 
I tried 'inherent value' too, but it was even more vague.


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## goingglobal

*Intrinsic value.*



synthia said:


> Right now the peso continues to fall against the dollar, while the dollar continues to fall dramatically against the yen, and has lost a bit against the euro and pound.
> 
> And I just looked up 'intrinsic value' as a financial term. It applies to companies, stocks, and stock options. I couldn't find anything for commodiites. All the definitions pointed out that it can vary widely as it is based on values which are estimated rather than known, except debt.
> I tried 'inherent value' too, but it was even more vague.


I recently researched the ''intrinsic'' value of the Mexico 10 peso coin. Not going to be good for me when I have to melt all these pesos I'm buying. And that is a proper use of the word ''intrinsic''.


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