Hyperinflation and non-retirement savings

[kumquat]

I was thinking of buying Canadian Maple Leafs (0.9999) from the Canadian Mint Welcome - Royal Canadian Mint or gold wafers from the gold department at my own bank (Scotiabank) ScotiaMocatta. These are anything but shady establishments!

Just curiosity. Any idea of the markup (the cost of a Maple Leaf vs. the bullion price) the day you buy or sell?

 

[DAYDREAMER]

And this feeling is based on what?

Ha

The feeling i get is by the unorganized look of the hole in the wall, and the dress of the sales guy. Never seen a banker type dressed in Camo! Are all the gold/silver coin stores this way, I have no idea. And yes, I am making my judgment on one store. That's my first impression and I'm sticking to it

 

[Independent]

Q: If hyperinflation comes, will the gov't hyper-inflate TIPs to keep up?

I've wondered the same thing. I've never done the math, but I expect the key fact is that the TIPS formula is backward-looking.

So true hyperinflation burns TIPS because it accelerates. First 10% annually, then 10% monthly, then 10% weekly, then 10% daily, then 10% hourly. Any backward formula will miss the recent acceleration.

But, a high inflation cycle that takes 1% up to 10% then back down to 1% over a period of years should work out pretty well. I don't call this "hyperinflation" because I've seen it and it didn't destroy the republic. (All this assumes that the CPI actually measures your inflation rate).

 

[Meadbh]

Just curiosity. Any idea of the markup (the cost of a Maple Leaf vs. the bullion price) the day you buy or sell?

I called the Mint the other day. I can't remember the exact price they quoted for the 1 oz Maple Leaf but it was at least a 10% markup. The cheapest is to buy a big gold bar, but they are just so awkward to carry around!!!

 

[jdw_fire]

I called the Mint the other day. I can't remember the exact price they quoted for the 1 oz Maple Leaf but it was at least a 10% markup. The cheapest is to buy a big gold bar, but they are just so awkward to carry around!!!

Northwest Territorial Mint has a smaller than 10% mark up

 

[angelbaby]

To me, the gold/silver coin buying and selling seems a little shady. The coin dealers I've seen have a little hole in the wall store, and you give them money to purchase gold/silver coins, and a week later, they give you your coins. Hmm, if i have to trust that process for my investments, no thanks! These coin stores look like they could go out of business at anytime. I also get the wierd feeling they have Anarchists swasticas and huge arsenals in the back room. Not a system I trust.

Well, it didn't always used to be like this, but if you've been watching the precious metals market carefully like I have over the past 8 years, you'd remember a time when you could go into any shop and get your gold or silver right over the counter at a live spot price. But, the demand for Gold American Ealges, Silver American Eagles and Candian Maple Leaves has literally skyrocketed over the past few years that the Mint has back-ordered and at times halted production. I don't think the current prices of gold and silver reflect true demand. There is much evidence of manipulation in the gold and silver markets that suggest that someone (probably governments who rely on confidence in fiat currency) is trying to keep their prices down. And, it's so obvious.

Gold's last all-time high, before it recently hit $1,000 was back in 1982, when it hit $820. In the 1990's it dropped to $250 when the central banks started leasing gold and selling it on the open market. Alan Greenspan even said openly that central bankers should lease gold in increasing quantities should the price rise. If that isn't government price intervention, I don't know what is.

If we were to index gold with government-reported inflation using today's measures, it's all-time high price in 1982 is somewhere near $2500. But, if we were to use Pre-Clinton inflation measures (they've been re-scaled and manipulated over the decades, BTW, to exclude food & energy and to substitute things like hamburger for steak), then the real gold high is somewhere near $6500. Now, factor in the recent printing spree that started with Greenspan and is now in overdrive today, and you can see where people get those crazy-appearing predictions that gold will break $10,000 or even $20,000. I personally see the gold spot price nearing $1,200 this year and breaking $3,500 over the next 5 years. And that's being conservative.

 

[angelbaby]

I'm thinking of buying some gold. Haven't decided yet whether to go with bullion or gold certificates. Maybe a bit of both.

Get bullion. So called gold certificates, gold derivatives and gold ETFs when you read the fine print have nothing backing them but a promise to pay the holder the market value of gold should they be sold. Most don't have any gold in a vault and if they do happen to, it's usually not enough to cover every outstanding security they have issued. Should the markets freak and gold skyrockets amidst a currency crisis, these things will be just as worthless as any other debt-based obligation.

I also don't trust gold storage vaults. Gold is tiny and compact. A one ounce gold coin is a little heavier than a silver dollar. You can easily store about $15,000 in gold in a empty sock in your drawer if you wanted to and no one would know it's there. A better hiding spot, however, is in a floor safe located underneath your kitchen fridge or behind the toilet in a bathroom in the basement. I'd spread it out a bit. Put some in a far corner of the attic. Sew some literally into the bottom four corners of your master bedroom mattress. Sew a coin or two into the living room curtains as anchor weights. (People will never tell.). Make a little list of all of these little locations and store that somewhere safe. Tell only your spouse (not your girlfriend or boyfriend).

And keep a little on your person. I personally always have a 1/10th oz. gold eagle necklace and a 1/10th oz. gold ring on my person at all times.

Silver, on the other hand is much harder to store. I'm always trying to think up ways to store my silver. So bulky, but I know I'm getting more for my money. I bought when the gold-to-silver ratio was 1:82. Now it's nearing 1:60. Woot!

 

[Kabekew]

Some of you people are bonkers! Sewing gold coins into curtains?

Come on, what are you people going to do with gold? It's worth nothing intrinsically until you sell it on the open market... just like all other securities. Yes, it used to be worth something intrinsically when you could buy things with it in the wild wild west. Unfortunately, those days are over. Store clerks, gas stations and WalMart will not accept gold for payment.

 

[Koolau]

Some of you people are bonkers! Sewing gold coins into curtains?

Come on, what are you people going to do with gold? It's worth nothing intrinsically until you sell it on the open market... just like all other securities. Yes, it used to be worth something intrinsically when you could buy things with it in the wild wild west. Unfortunately, those days are over. Store clerks, gas stations and WalMart will not accept gold for payment.

You've obviously never lived in a barter situation. You don't store gold coins or any other "commodity" to buy stuff at Walmart. My parents and their families lived through times when barter was more common than using "money". FIL and many family friends fought in WWII and told stories of barter with cigarettes (actually, a common currency at that time).

Gold or other such valuables are for WTSHTF - not for current, common use - hence the hiding in places not easily accessible. In one respect, you are right. Gold has no intrinsic value (e.g., you can't eat it). Still it has been recognized as a store of wealth from ancient times. Personally, I'd rather store food - you can eat that.

If you don't believe such times could ever return, then I'm sure you see this as foolish. You shouldn't consider such things for your personal plan. Simple as that.

 

[Maurice]

...they've been re-scaled and manipulated over the decades, BTW, to exclude food & energy ...

I'm not sure where this meme originated but its as common as it is untrue. CPI-W (used to index Social Security) and CPI-U (used for TIPS and iBonds) both include food and energy. While the government does publish a 'core inflation' number, it is not used in any government indexing that I'm aware of.

 

[Kabekew]

You've obviously never lived in a barter situation...

Bartering is trading goods or services for the same, like paying for your doctor visit with eggs and milk from your farm. That has nothing to do with trying to pay for things at WalMart with gold coins.

And if you think the U.S. economy is about to completely collapse and revert back to 13th century gold-bar trading, then you are indeed bonkers! Economists are already calling the recovery to this normal, expected, cleansing, cyclical recession: Growing number of economists see recovery on horizon - Apr. 6, 2009

 

[harley]

And if you think the U.S. economy is about to completely collapse and revert back to 13th century gold-bar trading, then you are indeed bonkers! Economists are already calling the recovery to this normal, expected, cleansing, cyclical recession: Growing number of economists see recovery on horizon - Apr. 6, 2009

And they've been right so many times before! And they're all so rich (and handsome too).

Jeez, I'm not a sky is falling type, but you've almost convinced me.

 

[Meadbh]

Just curiosity. Any idea of the markup (the cost of a Maple Leaf vs. the bullion price) the day you buy or sell?

Here are the links to Scotiabank's markups for Maple Leafs and gold bars:

ScotiaMocatta

http://www.scotiamocatta.com/products/bullion.htm

 

[ziggy29]

And if you think the U.S. economy is about to completely collapse and revert back to 13th century gold-bar trading, then you are indeed bonkers! Economists are already calling the recovery to this normal, expected, cleansing, cyclical recession: Growing number of economists see recovery on horizon - Apr. 6, 2009

And yet some economists are still calling for Dow 1000. Not 10,000 -- one thousand.

So some are extremely optimistic that we've already bottomed, and some are so gloomy that they make Roubini look like Pollyanna.

And some of them will be right. And because they got this one call right, they will "earn" guruhood regardless of their past track record or future prescience.

 

[Independent]

Well,

Gold's last all-time high, before it recently hit $1,000 was back in 1982, when it hit $820. ....

If we were to index gold with government-reported inflation using today's measures, it's all-time high price in 1982 is somewhere near $2500. But, if we were to use Pre-Clinton inflation measures (they've been re-scaled and manipulated over the decades, BTW, to exclude food & energy and to substitute things like hamburger for steak), then the real gold high is somewhere near $6500. .

I don't know where you got your data, but I think you should consider what it means. If it takes $2,500 to buy what $820 bought in 1982, then incomes would have to have increased by a factor of 3.0 to stay even with inflation. If the correct number is $6,500, then incomes would have to increase by a factor of 7.9. I'm old enough to have been a full-time worker in 1982. I know that my income didn't increase by anything like 7.9, yet I know that my living standard didn't decrease. I have trouble thinking of even one major item that has gone up by a factor of 7.9 in that time period.

(Even the $2,500 looks odd. The "official" numbers for CPI-U are 94.3 for Jan 1982 and 211.1 for Jan 2009. That's a factor of 2.2, so $820 only needed to go up to $1,840 to stay even.)

 

[mark500]

And keep a little on your person. I personally always have a 1/10th oz. gold eagle necklace and a 1/10th oz. gold ring on my person at all times.

I keep a 1 oz American Gold Eagle in my underwear. Just in case.
I suspect a lot of "pump and dump" is going on in the gold market atm.

 

[Koolau]

Bartering is trading goods or services for the same, like paying for your doctor visit with eggs and milk from your farm. That has nothing to do with trying to pay for things at WalMart with gold coins.

And if you think the U.S. economy is about to completely collapse and revert back to 13th century gold-bar trading, then you are indeed bonkers! Economists are already calling the recovery to this normal, expected, cleansing, cyclical recession: Growing number of economists see recovery on horizon - Apr. 6, 2009

You are right that barter has nothing to do with buying things at WalMart w/gold. WTSHTF, WalMart probably won't be open - unless you count the folks breaking windows with bricks to get the stuff they need to survive. As I think I alluded, if you don't see this ever happening, then don't prepare for it. Some folks like to wear suspenders and belts (in my case, also an elastic waist band). Throwing a few coins in the safe deposit box isn't going to change anyones AA much and it might help them to sleep better at night.

I hope you are absolutely correct about the economy. I'd much rather it would go back to the way it was a few years/months ago. Someday it won't - at least not for several years as happened in the 30's. Then, having something to barter (as a way of life - not going to WalMart) will have seemed like a wise thing to do - not bonkers. But, again, I hope all of us who think it could be different some day (maybe not this time) are completely bonkers!

If some day those who seem bonkers now suddenly seem like financial wizards, I will NOT be celebrating. Who wants to be the richest bum in the train yard?

 

[Kabekew]

I hope you are absolutely correct about the economy. I'd much rather it would go back to the way it was a few years/months ago. Someday it won't - at least not for several years as happened in the 30's. Then, having something to barter (as a way of life - not going to WalMart) will have seemed like a wise thing to do - not bonkers.

No, your gold would be worthless. That's why it's not a wise thing to do. If this 3% uptick in unemployment and GDP receding back to *gasp* 2007 levels does indeed mean the entire collapse of the western world, nobody's going to accept gold coins or bars for anything. People will barter, but nobody will barter for useless gold coins. This isn't the 15th century... gold is simply no longer a world currency and nobody sees it as that.

I think you're better off spending your $15,000 on seeds, farming and fishing equipment and shotgun ammo if you truly believe our 8.5% unemployment means the end of the world is here, don't you agree?

 

[Koolau]

No, your gold would be worthless. That's why it's not a wise thing to do. If this 3% uptick in unemployment and GDP receding back to *gasp* 2007 levels does indeed mean the entire collapse of the western world, nobody's going to accept gold coins or bars for anything. People will barter, but nobody will barter for useless gold coins. This isn't the 15th century... gold is simply no longer a world currency and nobody sees it as that.

I think you're better off spending your $15,000 on seeds, farming and fishing equipment and shotgun ammo if you truly believe our 8.5% unemployment means the end of the world is here, don't you agree?

Disagree with your premise that 8.5% unemployment means 15th century any time soon, but I agree that if we DO go back to 15th century then seeds and ammo would be better than gold. Going back to the 1930's, I'd like a little gold too. In any case, do what YOU think is right for YOU. Again, hope it doesn't come to either scenario.

 

[Dennis]

Forgot to add... My advisor's Father, moved his and His Clients $ of ave of 75% into those LT Treasuries back in the 80's> Carter Yrs..( My Dad's too ) and His Son, running the firm, said he will do the same thing for those having wnough HNW to make it worth while..

just like Greenspan said he "Should " have done, but didn't after 04'....

Give me a 10%- 30 yr LT Treasury and the Heck with everything Else!