Gold and Silver?

[Elom0]

This quarter it's possible that the economy might shrink again. Does that mean everyone should start buying Gold and Silver?

[phillip1882]

i know its off topic but this forum isn't really meant for economics.
i would personally buy bitcoins though.

[CDavis7M]

When in doubt, zoom out.

[jlt]

This quarter it's possible that the economy might shrink again. Does that mean everyone should start buying Gold and Silver?

"Everyone" probably not, unless your currency is at risk of hyperinflation.

[bogiesan]

Buy low and sell high. Amateurs buy high and sell low because they're amateurs.

Precious metals and unregulated currencies are speculation, not investing. The history of inflation and recession hedging is easily researched. Invest a few days in becoming an informed consumer.

My equity holdings from the last decline of 2008 recovered strongly and, even looking at the current trends of markets, I am still ahead. That will change, of course, but, based on the past forty-five years of managing my mutuals, I hope (and expect) the long term results will be good to excellent over the next ten years, about the time we will need the money. As long as the USA does not descend into anarchy and that freak in Russia is constrained from launching his nukes, I'm happy.

My father bought all of his eagles at US$400/oz (1995). Selling at $1700-1950, he has realized delightful returns. If I had bought eagles at the bottom of the last major dip for $1100 (December 2015), I'd still be happy selling at today's $1900. But, since August, 2020, gold has only been fluctuating slightly, between $2000 and $1800.

I bought a bunch of silver at $16/oz in 2015, hoping it would someday again hit $30-40, as silver did in 2011-2012. Nope. Today, silver is $23, so I'm just hanging onto it because the bars are pretty.

Crypto? Eh. WIRED and the WSJ have crypto reporting suggesting it is far less attractive than the sellers would have you believe. Look beyond the Super Bowl ads and make sure you can loose a boatload of your stake in the short term while you await the next big run up -- if it ever arrives. That's worse than speculation, that's just gambling.

Might as well bet on professional go tournaments!

[Elom0]

Bitcoin seems like the kind of thing that one would only ever use a relatively amount of their wealth, maybe the only exception might be a situation in which it crashes like now, since it's likely to recover in the medium term. But I don't really like trading anyway, in fact I hate short term trading.


Gold and silver seem to be non-meaningful to medium term investments, so yes in the short term it's just gambling, but is it not a great long term investment for most people except those in countries like Japan since except in places like Japan currencies such as the current world reserve currency the US dollar and the likely future world reserve the Chinese Renminbi tend to inflate over time, albeit very slowly. I prefer academics over euntreponership, and so I do not do or intend any trading whatsoever except if I have to exchange currencies. I just want to gold and silver to keep since it won't inflate. I only weirdly mention gold and silver in regards to the short term because I'm genuinely scared of a recession this quarter. Another thing to put me off economics! An excuse to igbore it for me, hehe.

[Joaz Banbeck]

I listened to an interview with Jay Powell on Marketplace about 10 days ago, after he was re-confirmed as head of the Federal Reserve. He was adamant that he was going to get inflation down to 2%. In his opening comments, he said:

"...we understand that inflation is very painful, that the Fed is accountable to get inflation down to 2%, and that we have the tools and we have the, you know, the strong desire to get inflation under control. And we’ll do that."

When the interviewer, Kai Ryssdal, pressed for details, Powell doubled down:

"...we fully understand and appreciate how painful inflation is, and that we have the tools and the resolve to get it down to 2%, and that we’re going to do that."

Lest he be misunderstood, about a minute later, Powell said:

"...we need to get back to 2% inflation, that’s the main thing. The main lesson is we must do whatever, you know, what we need to do to get inflation back to 2%. And we have the tools to do that. And we will."

And just to ensure that nobody could miss the point, a few minutes later he said:

"The committee and I are firmly committed to getting inflation back down to 2%."

So, despite my habitual cynicism about believing government employees, I tend to suspect that the Federal Reserve Board of Governors really is going to try to get inflation down to 2%.

They are going to do that by raising interest rates. They have a handful of tools that are technically different, but the use of any of those to decrease inflation means that they are going to slow growth.

Inflation is basically too many dollars chasing too few goods. It is happening now, and that situation is going to continue. On the 'dollar' side, we have seen the US government dump billions into the economy in response to the pandemic. On the 'goods' side, supply chains are still screwed up, and the former largest exporter of cheap goods on the planet - China - is experimenting with ruinous lockdowns in a misguided effort to totally squash the Corona virus.
In short, there are lots of dollars and not enough goods. Both sides of the equation are tending towards more inflation over the next several years.

This, IMHO, is a monster of a magnitude that Powell and company do not fully appreciate. And it is not transitory.

So when the Board of Governors tries bring inflation back down to 2%, they are going to have to push interest rates through the ceiling. They are going to kill growth. They will push the economy into a recession.

In other words, we are going to have a contracting economy AND inflation, otherwise known as stagflation.


Enough of economic theory for the moment. Let's look at practical issues:

1) The job market favors the employee more than it ever has in U.S. history. This will change when businesses cannot afford to invest in growth. The change in investing in employees will be sudden.
When businesses have to pare down, it takes months or even years to efficiently divest capital goods like forklifts or buildings. But employees can be dismissed in five minutes.
Thus the change in employment opportunities will be very sudden.

So, if you have a job, keep it. If you are going to change jobs, do it now, so that you are through your probationary period when the music stops.

2) If you are invested in large caps, sell them off soon. ( It may be too late for this even now )

3) Do not hold cash - other than enough to cover your bills. Put your money in something that may hold its value in inflationary times. Gold or silver may work, as will firearms. Real estate should be good too - as long as you don't need quick sales. ( Personally, I'm about 1/3 in rare books and 2/3 in real estate. )


Hang on. It is going to be a bumpy ride.

For details of your future pains, look at https://www.marketplace.org/2022/05/12/ ... some-pain/