Gold hits record high on debt fears and chance of more Fed stimulus

I believe that the great depression was precipitated by thousands of farms failing because of deflation in food prices.

 

Seemed pretty simple to understand to me too.

 

I find that hard to believe unless there was some huge bubble created by government intervention.

 

also because the propaganda on CNN says gold is no good

 

CNN says gold is no good?

I'll have to go and buy some more then.

 

Economic historians (especially Friedman and Schwartz) emphasize the importance of numerous bank failures. The failures were mostly in rural America. Structural weaknesses in the rural economy made local banks highly vulnerable. Farmers, already deeply in debt, saw farm prices plummet in the late 1920s and their implicit real interest rates on loans skyrocket; their land was already over-mortgaged (as a result of the 1919 bubble in land prices), and crop prices were too low to allow them to pay off what they owed.

http://en.wikipedia.org/wiki/Causes_of_the_Great_Depression

Similar problems to what we seen in the current housing crisis.

 

especially if those farms had a mortgage on it.....low food prices meant less money to make mortgage payments to the banks!

 

Or it could be that when something rises and rises and rises...often times it falls like a rock...suddenly.

But gold, silver, and other precious metals will never go down to nothing.

But they could fall enough to take years to recover.

So sometimes a person has to think...should I sell now and buy even more when the price drops...or is it going to continue to rise?

You can put all your eggs in one basket...and watch the basket...or spread the risk.

 

A problem if your land is not paid for...mine thankfully is paid for...I have no outstanding loans. I know it is not always possible to keep from borrowing money...but if you do it decreases your buying power.

I do not drive a new car...my pickup has no radio...but the bills are paid and my family eats well.

 

I don't see where this is laid out as the specific cause, or, indeed, how failures in the rural sector of the US economy including some bank failures would lead to a global economic depression.

 

Fair enough. "Precipitated" was probably not the right word. Preceded by would have been better.

 

The stock market crashed...and the banks didn't have enough money to cover deposits. People had little money to spend...factories closed...and people had less money to spend. More factories closed. Advertisers had few clients.

And so on...

 

Massive deflation meant that businesses and farmers earned less and couldn't cover their debt obligations which were fixed.

 

And it became a spiral.

If people saw prices dropping, they had every reason to think they would keep dropping. Why buy a product today when tomorrow it would cost less? So they didn't. Which meant less sales and more business failures. Which meant more unemployment and hence less demand and hence more deflation.

And the process continued.

Deflation is as harmful to an economy as too much inflation.

 

remember one thing....in the past when a boom ends there is always one common denominator......in 1999 the tech bubble...in 1929 the stock mania.....in 1990 the LBO mania.....and in 1980 the commodity bubble.....and that is higher interest rates.......now I ask you...do you see interest rates rising any time soon? So how can anyone say gold is about to collapse?

Its truly amazing how little people understand investment fundamentals...perhaps this is why people are doomed to die with lunchbox in hand LOL

 

but deflation doesnt go on forever, eventually the economy recovers once the natural bottom is reached!

 

thats nonsence.....look computers are falling in price constantly right? Does that stop people from buying one now? Same with digital cameras or cell phones.....if someone wants something they wont wait. Same with food prices...so if food prices are falling are you going to say...."Well I better not eat until prices fall some more " LOL.....of course not......if someone wants something they will usually go and buy it.....look at those apple tablets...they are selling like hotcakes even though I can guarantee you that in a couple of years they will be much cheaper!

 

Even during the housing boom.

http://www.wsjprimerate.us/wall_street_journal_prime_rate_history.htm

In June '03, the U.S. prime rate was 4%.

By June '06, it was up to 8.25%.

And it did not start coming down until September '07 - which by then the bust was beginning.

'Housing prices peaked in early 2006, started to decline in 2006 and 2007,'

http://en.wikipedia.org/wiki/United_States_housing_bubble

 

oh yeah....I forgot the housing boom LOL.....but my point is that its always high interest rates that kills any boom that is in play....funny how nobody has caught on to that!

 

And it's often artificially low interest rates that are largely responsible for the booms in the first place.

END THE FED...ALL OF THEM (i.e. central banks)!!!

 

although I agree, its the fed that is slowly making me rich

 

Gold is $1836.28 (up $47.78 ).

That is only $33.72 off of it's all time closing high.

 

I'll pass on the "natural bottom".

One great depression was enough.

 

Arguably more harmful because it increase the relative costs of fixed obligation and borrowing.

 

One thing about gold that I have not heard mentioned...a few years back the Chineze govt. allowed their people to own gold.

I read about it a couple of years back.

If it is true it would increase demand for the yellow metal.