Cash Is Gradually Rising In Value As Prices Ease

The credit downdraft is already three years old.  It could go a  lot further yet.  Credit is the largest element in money supply.  The effects of a collapse in credit across the globe are bound to be deflationary.  The only device the monetary authorities have at their disposal to counter a deflationary spiral is QE.  Despite trillions of $s being released by ‘The Fed’, the amount of credit is still falling.

   I was born in 1954, when credit last bottomed – 56 years ago.  It seems likely that credit will be falling for the rest of my lifetime, and that holders of cash will find their paper worth considerably more each year that goes by.  When the world is short of cash, its value must rise, as prices get squeezed.

Financial commenters are the most energetic in arguing against such notions, I find.  I’m ready for you!  Start with house prices.  Most houses are priced at aspirational levels which they will never sell at.  The top of the market still moves, as does the bottom, but the middle, the bulk of the market, is in gridlock with nothing moving. 

SILVER PRICE.  Many comments below are focusing on the silver price.  Some say this buying silver is the way to avoid the political menace of growing centralisation of power in the hands of central bankers, who are destroying fiat currencies by issuing excessive QE.  Strangely central bankers are also claimed by the same people to be trying to form a one world currency backed by precious metal.  

Check out a five year silver chart –

Ignoring the recent price surge and crash, which might suggest a bubble was created, look at 2008 when the world’s stock markets crashed around the time of Lehman Brothers.  Silver halved in price from $20 to $10.  It recovered with the stock market, surged and then crashed.  
How can this be said to be a safe haven?  It looks to be anything but.  Only the future can decide this one!  But the topic generates more emotion than any other in comments!

The Tap Blog is a collective of like-minded researchers and writers who’ve joined forces to distribute information and voice opinions avoided by the world’s media.
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32 Responses to “Cash Is Gradually Rising In Value As Prices Ease”

  1. Me says:

    In my local supermarket own-brand 4*2L bottled water has gone up 20p since January. It’s now £1.47. At this rate it will be £1.70 by Christmas.

    Remind me how this is deflation?

    There is deflation in the large assets but inflation in the survival needs: rent, food, water, electricity and fuel.

  2. Me says:

    Your cash will rise in value compared to houses but fall compared to bread. This is because demand for luxury goods is elastic – dependant on credit and the number of people with secure, high paying jobs – whereas the demand for basic survival needs is inelastic. In fact the demand for food and water is growing because the world’s population is increasing and India and China have developed large consumption classes.

    If you hold cash you will be caught in a depression pincer movement… you’ll be able to buy, or put a downpayment, on a larger house but won’t be able to put any food on the solid oak, 100 square foot dining room table because of rampant inflation in the essentials of living.

    What’s more important – moving into a larger house or feeding yourself?

    Cash is trash. Only physical gold and silver will rise in value compared to bread AND houses because it is has intrinsic value and is the real money.

    The fiat currencies, the $ and the £, will go – or be taken – to zero because they are worthless. When this happens they, or perhaps we – when we beat the NWO – will bring in a new currency system based on a gold standard.

  3. Twig says:

    To get the housing market moving Gordon Brown’s perverse stamp duty rates need to change. The economical spin-off comes when people spend money on renovating their newly purchased properties.

  4. kevin says:

    in my opinion we’re headed not just for a double dip recession, but a treble or quadruple dip. growth needs to stay above 3% before unemployment starts to fall, and even then there will be a considerable lag. QE hides the real extent of deflation. Unemployment figures are massively massaged downwards.

  5. Tapestry says:

    Rising prices of food etc are a desperate attempt by big corporations, agribusiness, energy companies, etc, assisted by financiers, not to take a hit from falling economic activity.

    The game will change when the insiders are ready to crash all markets simultaneously, after quietly cashing out, when they will buy back in and reap 100 to 1 gains within five years as prices recover.

    I agree about the heavy hand of manipulation, but believe it is playing a less one-dimensional game than some people think.

    Those caught holding debt or high overheads will be creamed. Those in cash at the given moment will cream.

  6. Me says:

    //The game will change when the insiders are ready to crash all markets simultaneously, after quietly cashing out, when they will buy back in and reap 100 to 1 gains within five years as prices recover.//

    They’re already cashed out of equities. The insiders have cashed into precious metals – that is physical bullion.

    That says to me something you’re not saying: that physical precious metals aren’t going to crash.

    The paper metal market is going to crash. To zero. The physical metal market is going to the sky.

    //I agree about the heavy hand of manipulation, but believe it is playing a less one-dimensional game than some people think.

    Those caught holding debt or high overheads will be creamed. Those in cash at the given moment will cream.//

    You always need some cash. Cash is not trash until it’s trashed. Until it is, it remains useful. So it would be useful to keep some cash, plus a bit extra as a hedge. But you don’t want to leave it too late.

    One doesn’t need to go all in bullion. Some have mortgaged their houses to buy extra. The minimum is just enough to cover yourself in the historical inevitability the fiat currency folds.

    They are going to crash the dollar and replace it with a global single currency. The dollar will still exist but it will be linked to a global basket of currencies.

    That plan is out-lined by the IMF, discussed Bilderberg and at financial summits. Were it not now to happen that would represent a radical shift in the plans of the NWO.

    If they crash the dollar to achieve the one world currency then those hold dollar or pound cash, and nothing else, will be caught naked. That’s why the insiders are buying into metal. That’s why all the top investors of the last 30 years are buying metal.

  7. Twig says:

    @Me

    Thanks for the info, do you know when this will happen? i.e. one year, three years ?

  8. Me says:

    December 2012 for the dollar crash, which will in fact be a manufactured demolition. I’m preparing on the basis it is two months time but I think they planned to wait until after the London Olympics.

    This date might assume they get the Libyan gold, one reason for the invasion for Libya. This would help them keep the paper ponzi scheme going. The Libyan invasion is set for late September/October 2011.

    Right now the fiat currencies are fighting a trade war race to the bottom. When that done and the currencies collapse we have a great war. Or maybe the currency collapse happen after the war. I’m not sure.

    My influences are Gerald Celente Trends Research Journal, Alex Jones and William Lindsey, plus the general milieu.

  9. Me says:

    I have other macro influences… for example, David Hackett Fischer in “The Great Wave: Price Revolutions and the Rhythm of History” predicts an inflationary spike at the end of what he refers to as our most recent wave. (He doesn’t refer to NWO but one must assume one day someone will come up with a unifying theory). I don’t think the inflationary spike applies to houses and possibly not even the stock market.

  10. Tapestry says:

    The word is volatility. They make money from prices going both up and down. That means you should expect price movements in either direction. Timescales are much longer term, as the chart above indicates.

    Many prices are falling at the moment, as sellers compete for the shrinking number of dollars – shrinking despite QE.

    Only Wall St manipulated markets are able to put in peaks, and price manipulators work both ups and downs.

    I see a confusion in the idea that silver/gold are both the ideal currency of the political opposition – the Alex Jones’ and Ron Pauls, as well as supposedly being that of the insiders, who aspire to a world single currency. Both sides seem to be in total agreement.

    That said the Euro, the biggest step yet taken in that direction, is in all kinds of trouble.

    If money issuance was brought under control, and the world’s central bankers were not able to issue currency and charge interest for it, and as a result, always be pressing governments to increase spending and start wars, fiat currency could be controlled successfully to keep economies growing…by national central bankers, who were civil servants.

    Such would be the political sea change, not the hoarding of precious metals, which only slows down the velocity at which money moves in the economy, and worsens the slump.

    Meantime the insiders could easily play a game and coin it by pulling in buyers into precious metals and then dumping the price as they have done recently with silver.

  11. Twig says:

    Bearing in mind their wealth of natural resources, would the Aussie dollar be a safe haven?

  12. Me says:

    Tap, it’s about survival. Perhaps you have all the resources you’ll ever need… and can afford to believe in a perpetual fiat currency

    //I see a confusion in the idea that silver/gold are both the ideal currency of the political opposition – the Alex Jones’ and Ron Pauls, as well as supposedly being that of the insiders, who aspire to a world single currency. Both sides seem to be in total agreement.//

    There is no confusion. You are confused.

    They want control of money. They also want the money to be REAL money.

    //Meantime the insiders could easily play a game and coin it by pulling in buyers into precious metals and then dumping the price as they have done recently with silver.//

    They’ve dumped the price of paper silver. Not physical silver which is becoming scares. Paper silver is still the mechanism by which physical silver is priced but the mediums will separate if the price goes much lower. Silver is rare.

  13. Tapestry says:

    The price of real silver has fallen, Me. I know as I buy it as part of my business. Silver is not rare. You can get as much as you like of the stuff.

  14. Me says:

    There is vastly more above ground gold than silver yet gold is 35* the price of silver. The reason for that is cultural.

    Physical silver will follow the price of paper silver until the separation point.

    //You can get as much as you like of the stuff.//

    It took Eric Sprott months to acquire a few million ounces for his silver fund.

    If silver was so easy to acquire, why is the Comex settling in paper, not physical silver deliveries? Why are the inventories of SLV and Comex becoming depleted because people are withdrawing silver at a faster rate than it is being replaced*?

    *It’s not being replaced. There have been no new silver deliveries for months and months.

    Something’s up. Celente says you need to be an Octogenarian to smell the rate.

  15. Tapestry says:

    I remember times in the last thirty years when silver was ‘short’ physically, and it usually preceded a temporary price ramp. Now is not one of those times, from a physical trader’s point of view.

    Markets are heavily manipulated, and could travel equally in either direction.

    Hoarders of metal should not be claiming that silver will make a currency. If it is to be a currency, it can only owned by the government, with paper guaranteeing its existence. Currency is for trade, not for a few to starve out the rest of humanity.

  16. Me says:

    Few people are claiming silver will be a currency. That is not why people are buying silver. People are buying silver simply because it is priced below its true value and they believe that cannot last for ever.

    Most people do not consider gold or silver an investment. It is money. The end game is to trade it in for paper money that is backed by gold and silver. That won’t happen until the crash of the global fiat currency system, which buyers believe is an inevitability.

    Hyperinflation is often preceded by a short period of deflation. Watch out. This is like the tide going out before the tsunami. As the waves retreat don’t be the little children running out to pick up the stranded fishes.

    Gold and silver are not in a bubble – yet. There are too few people buying. They will probably only be in a bubble when Tap catches on to the need to buy gold and silver!!

  17. Me says:

    I would love silver to go down to $10-$20 an ounce and gold to £300-500 because I hardly have any.

    It’s because other people are thinking the same that those prices are unlikely to be reached. You can’t print gold and silver.

  18. Tapestry says:

    Food, shelter, clothing and water are a higher priority to the hoarding of money, for most people. Gold grew at only 12% in the last 12 months in Sterling terms. Silver did better than that, but so too did most investment categories fuelled by QE2, which has now stopped.

  19. Tapestry says:

    This fellow’s always good to follow
    http://video.ft.com/v/1039260932001/A-tale-of-two-inflation-policies

    I’ll check your link, Me

  20. Tapestry says:

    I find any explanation which requires suppression of nearly everything a little hard to believe. Bankers manipulate, I agree, but they swing prices in both directions, often when the public least expect it.

    If you listen to the first three FT clips, you see a picture of declining volumes in the world’s asset markets. Falling volumes usually indicate increased volatility – more ups and downs. That is where we are headed, I believe. There is no such thing in business as a one way street.

  21. Me says:

    Bankers can move the prices in both directions but only to some degree and not indefinitely. Nobody has claimed there is a “one way street.” We are in a long-term precious metals bull market. Do not compare the value of precious metals to a currency but to the cost of assets. Is the price of gold and silver going to continue to rise against houses? Yes.

    Brazil and Turkey are different countries with different population profiles, different resources in different parts of the world. They have different priorities. The economies don’t exist in test tubes separate from the rest of the world. That FT video completely and utterly vacuous. I wouldn’t get my financial information from FT.

  22. Tapestry says:

    To say that one commentator in the FT has some merit is not to endorse the whole organisation which is inevitably europhile etc.

    The best summary of the situation is always Mark Twain. viz. Prediction can be very difficult, especially when it’s about the future. For fifty years house prices were in a bull market, ‘fed’ by endless credit. Look where that one ended up. The bull runs until it stops.

  23. I thought I would join in here, to point out a policy tool the CB’s do have and have yet to use. It is kind of like a “nuclear” option but I for one believe it will occur.

    That is NEGATIVE Interest rates as espoused by former BoE member Willem Buter (http://www.voxeu.org/index.php?q=node/3626) and already instigated by our Swedish neighbours. http://www.thelocal.se/21868/20090903/.

    As I have posted to my clients, the process will be simple:

    Negative rates will create a rush to cash which will be followed by dated money: Money that has an expiry date to use by.

    Obviously there will be a rush to bullion, and that will be taxed to death.

    There is no easy way out of this and without question many good people, mostly those that can least afford it, are going to be trapped and crushed.

  24. Twig says:

    @MadNumismatist (or is it Mad Max?)
    That sounds very pessimistic.
    Where would you put your savings?

  25. I thought I had posted a reply, perhaps the ghost in the machine. Anywho, it looks like the Swiss are going to go Negative on the Francs A**.

    The second central bank EVER to have a negative interest rate. I guess it is one-way to stop all those E500 euro notes flying into Zug.

    http://ftalphaville.ft.com/blog/2011/07/14/622926/

  26. Tapestry says:

    Interesting, MadNumismatist. Since the new version of Blogger was launched (without option offered) I have noticed all kinds of minor interferences. The monitoring from googlebot is non-stop. Comments go missing (as before), but I’ve seen out-clicks disappear from sitemeter, where I had seen them previously. Pageview stats are being doctored too. They are clearly trying to get me to think I get no feedback etc.

    Thanks for the perservering with your comment.

  27. Twig says:

    How does one go about buying and storing physical gold?

  28. Tapestry says:

    Baird & Co, London sell and store coins for you.

  29. Twig says:

    @Tapestry
    Baird’s offer a wide variety of coins, but which to choose? presuming you need to use them primarily as a hedge against failing currencies and perhaps as a last resort a means of support and escape from a complete meltdown in the EU.

    I suppose a range of small and large denominations would be useful, but which, Krugers, Mapleleaf or Kangaroos? Does it make any difference? after all, gold is gold?

  30. Tapestry says:

    I’d be careful buying now Twig. Gold was $300 ten years ago. No one wanted a metal that sits and does nothing except cost money to hold and insure, and had fallen in value for twenty years.

    It’s now $1600ish ten years later, and could be right at the top. Only speculators are buying, funds and governmments. It’s £1000 an ounce. It was £180.

  31. Twig says:

    @Tapestry
    Isn’t it more to do with devaluation of paper money? If the U.S. continue printing money to pay their debts then prices will continue to rise. You can’t print gold.
    And if interest rates go negative there will be a cost attached to holding paper currency too. Mind you, I don’t understand how they can keep interest rates artificially low when the government can’t even borrow at that rate.
    Fiat money is only as good as the government that issue it, and Wavey Davey’s mob do not inspire me with confidence – I hear that they’re spending more public money now than Labour were, and they’re giving it away to the third world faster than they can print it. We’re doomed!

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