PP and Default
Moderator: Global Moderator
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radar
PP and Default
Did Harry Browne or does the PP address a country's default/bankruptcy? It has happened to countries before and is bound to happen again. To me it doesn't fall under one of the four economic scenarios discussed in the PP, but I'm a newbie. Thanks and appreciate everyone's efforts on this site.
Re: PP and Default
Gold would protect you.
Iceland provided a nice example of this sort of thing in 2008.
Iceland provided a nice example of this sort of thing in 2008.
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Re: PP and Default
Additionally, the PP was designed to work best in a fiat economy. Governments running a fiat economy are never forced to default like a household that can't pay their bills. Fiat governments are the monopoly issuer of currency, so the notion of them "running out" of it is not grounded in operational reality.
However, in a fiat economy a "default" could easily be defined as a period of negative real returns for government bond investors. In this scenario gold is likely to be a strong performer.
However, in a fiat economy a "default" could easily be defined as a period of negative real returns for government bond investors. In this scenario gold is likely to be a strong performer.
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Ad Orientem
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Re: PP and Default
Hi Radar,
Welcome belatedly to the forum. In general you would be hard pressed to find someone who was more skeptical of government than Harry Browne. The PP was specifically designed with one eye on the possibility of government failure. Governments rarely default honestly these days if their debt is denominated in their own currency. (That's a major problem for Greece, since they don't control the printing press.) Instead they almost always prefer covert default by financial repression and currency debasement. Gold is your main hedge there. And this is a major reason for keeping at least part of your gold holdings in physical form. Stocks might take a hit in a serious inflationary environment but are unlikely to become worthless and over time would recover. Cash should hold up in a low to moderate inflation because interest rates at the short end of the bond curve reset so rapidly, though it too could take a hit if you have a really severe currency crisis. Long term bonds however would get creamed. Gold historically is what saves the day. Whenever you have serious currency debasement or inflation starts rising outside normal parameters gold generally soars.
Welcome belatedly to the forum. In general you would be hard pressed to find someone who was more skeptical of government than Harry Browne. The PP was specifically designed with one eye on the possibility of government failure. Governments rarely default honestly these days if their debt is denominated in their own currency. (That's a major problem for Greece, since they don't control the printing press.) Instead they almost always prefer covert default by financial repression and currency debasement. Gold is your main hedge there. And this is a major reason for keeping at least part of your gold holdings in physical form. Stocks might take a hit in a serious inflationary environment but are unlikely to become worthless and over time would recover. Cash should hold up in a low to moderate inflation because interest rates at the short end of the bond curve reset so rapidly, though it too could take a hit if you have a really severe currency crisis. Long term bonds however would get creamed. Gold historically is what saves the day. Whenever you have serious currency debasement or inflation starts rising outside normal parameters gold generally soars.
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