Tuesday, March 10, 2009

Gold, Currency and Hyperinflation

Dear Ferfal,

In Argentina which has experienced hyperinflation and installation of a new currency, what has happened to the price of gold/silver in the new economy?

But why do you think the USD will not collapse?

Also thank you for the advice to buy real estate if possible. Do you think it is still worthwhile in California?

Thanks so much for your blog. Someone just told me about it tonight, and it's wonderfully informative and helpful.

Thank you,

Hey Bertha

The currency is still the same ( peso) what it did is drop from a pegged 1 to1 ratio with the USD to a 3 to 1 ratio. It lost 66% of its value.

Gold kept it’s value like it always does, even went up some given the country’s situation. You’ll find jewelry to be very expensive here compared to what you pay for in USA, and even if you go to a bank that deals with precious metal ( such as Banco Paino) you’ll find that PM are a bit more expensive here as well.
In general terms the gold business went up 500% since 2001.

I don’t know what will happen with the USD, it’s hard to say.
Apparently it’s doing well these days against the Euro, but the situation is still shake, another big bump and it can easily go down a lot.
To its advantage, as shaky as the situation is its still reputably the most trusted fiat currency world wide. In spite of everything, people trust it.

But again, it’s impossible to tell, and of course, nothing is as solid as solid gold. Gold usually goes down during periods of “prosperity” shall we, say, when the real estate market is overinflated and no one worries about anything.
When people see storms in the horizon, they start buying gold, and that increases the price some.
Still, it’s a pretty stable platform.

Imagine I can’t give you acquire advice about for a specific location.

If prices are still inflated then no, wait some more. IN general terms all across USA prices have gone down significantly and it’s a good buyers market now.

You’ll have to determine yourself if the prices in your area are still inflated, are reasonable, or are bellow reasonable and it’s a good deal to buy.

In general, no matter where you are, homes will not go bellow 50% of its real value. ( real value being what they where before people got stupid and charged 300.000 for a house that was really worth 200-250.000)
Once it reaches 50% -60% , investors see the potential and start buying to make long term investments when the wheel goes round .



Anonymous said...

One important difference between the USA and most of South and Latin America is that most debts are denominated in $ US dollars. Now, when a local currency deflates against the US currency, those debts are still payable in US$. This is a real problem.
For the US, the debt is in US$ and can be paid accordingly. The currency loss is not evident in settling debt. Now you do have the loss going forward in transactions, but historical debt is not affected. This is a huge difference.
The Japanese have hinted that they want the US to set debt in a currency index instead of the US$. So far that idea has gone nowhere.
But if in the future, that were to happen, then the US would also assume that potential loss.
This currency denomination of debt is a big thing, and one reason why the US$ will (should) not face the same problems as Argentina.

Anonymous said...

i'm scared. i hate this. I don't know what i'm supposed to be doing, stocking up food or trying to buy a gun or getting what little money i have out of the bank or what!

love your site FerFal. read it daily even though some of it scares the crap out of me...

I live in California

Anonymous said...

To the guy in the Socialist People's Republic of Kalifornia, your first step is to move to a state where you can actually buy a gun with a decent size magazine.

Anonymous said...

Whether you believe that bad times for America loom on the horizon or not, I think it’s always a good idea to be prepared for the worst. One doesn’t need to stock up on food and guns and live in a cave to be prepared, but there are some simple common sense ways to be ready in case of emergencies. Having a stash of non-perishable food, having a simple, reliable firearm that you can use confidently, having a way to generate and store power, having a way to purify water, are very small investments that anyone can start on the smallest of budgets. Any of these items can be kept for long periods of time and can be used for other purposes. Maybe we should cut out some of our superfluous spending and keep things on hand that are truly useful, and hence valuable. After all, isn’t that how our grandparents lived (and thrived)?

- James Howard, author of “The 5Gs of Survival” and What So Proudly We Hailed, a novel of surviving America’s last days.
Available on Amazon http://www.amazon.com/What-So-Proudly-We-Hailed/dp/1453672435/ref=dp_return_1?ie=UTF8&n=283155&s=books
“The unthinkable has happened…”

Vincent Cate said...

I think the US dollar is headed for hyperinflation. I have writing up some stuff at: