Permanent Portfolio Forum
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https://www.gyroscopicinvesting.com/forum/viewtopic.php?t=5123
What?! I thought government bonds in a fiat currency issuer country were the same as cash !Libertarian666 wrote: I would think that having a PP would make even this sort of brazen theft somewhat less horrifying:
http://blogs.barrons.com/focusonfunds/2 ... mmeting-5/
Argentina, anyone? Coming soon to a country very near to you.Libertarian666 wrote: I would think that having a PP would make even this sort of brazen theft somewhat less horrifying:
http://blogs.barrons.com/focusonfunds/2 ... mmeting-5/
goodasgold wrote:Argentina, anyone? Coming soon to a country very near to you.Libertarian666 wrote: I would think that having a PP would make even this sort of brazen theft somewhat less horrifying:
http://blogs.barrons.com/focusonfunds/2 ... mmeting-5/
Of course, if (like a lot of folks on this board) you believe that massive and growing unfunded liabilities do not exist, or never need to be repaid, or can be paid by merely issuing a "trillion dollar platinum coin," then there is nothing to worry about.
goodasgold wrote:Argentina, anyone? Coming soon to a country very near to you.Libertarian666 wrote: I would think that having a PP would make even this sort of brazen theft somewhat less horrifying:
http://blogs.barrons.com/focusonfunds/2 ... mmeting-5/
Of course, if (like a lot of folks on this board) you believe that massive and growing unfunded liabilities do not exist, or never need to be repaid, or can be paid by merely issuing a "trillion dollar platinum coin," then there is nothing to worry about.
Just yesterday Krugman denounced the U.S. president, complaining that Obama should have poured THREE times as much "ghost money" (i.e., THREE times as much unfunded liabilities) into Solyndra-type ratholes.Kshartle wrote: Awwwww man, Krugman suckered me again. He's so tricky with all that economic gobldy gook talk.
If someone told me they were going to not hold 25% gold and instead use some to buy a foreign property that could be a backup escape option, I wouldn't have any strong arguments against the plan. It's a hard asset that is less liquid. But it would still offer the same protection against confiscation and localized problems.Kshartle wrote: I think Harry Browne was much more on point with his earlier works where he always included some portion of one's wealth going into a retreat of sorts.
That could very well end up to be the most valuable of all investments.
I personally favor diamonds. Easily hidden. Easily moved even across borders. Foreign property should ideally be legally owned by a local proxy.craigr wrote:If someone told me they were going to not hold 25% gold and instead use some to buy a foreign property that could be a backup escape option, I wouldn't have any strong arguments against the plan. It's a hard asset that is less liquid. But it would still offer the same protection against confiscation and localized problems.Kshartle wrote: I think Harry Browne was much more on point with his earlier works where he always included some portion of one's wealth going into a retreat of sorts.
That could very well end up to be the most valuable of all investments.
What good is the foreign property going to do in this kind of SHTF scenario if you still have all of your monetary assets tied up in the U.S.? Wouldn't it be better to keep the 25% gold allocation, especially if the gold is stored somewhere outside the U.S? Maybe it would be better to give up the 25% LTT allocation instead?craigr wrote: If someone told me they were going to not hold 25% gold and instead use some to buy a foreign property that could be a backup escape option, I wouldn't have any strong arguments against the plan. It's a hard asset that is less liquid. But it would still offer the same protection against confiscation and localized problems.
I'm not saying don't own gold. Just that some people really hate the idea of holding gold and want income producing assets only. So for that situation if they wanted some geographic diversification, foreign property could fill part of that role.notsheigetz wrote:What good is the foreign property going to do in this kind of SHTF scenario if you still have all of your monetary assets tied up in the U.S.? Wouldn't it be better to keep the 25% gold allocation, especially if the gold is stored somewhere outside the U.S? Maybe it would be better to give up the 25% LTT allocation instead?craigr wrote: If someone told me they were going to not hold 25% gold and instead use some to buy a foreign property that could be a backup escape option, I wouldn't have any strong arguments against the plan. It's a hard asset that is less liquid. But it would still offer the same protection against confiscation and localized problems.
Exactly, so far I see the PP as being for the Portfolio portion of your wealth.Kshartle wrote: I think Harry Browne was much more on point with his earlier works where he always included some portion of one's wealth going into a retreat of sorts.
That could very well end up to be the most valuable of all investments.
Just buy MCD, you have all the things you mention + a cash cow in prospering times.craigr wrote: I'm not saying don't own gold. Just that some people really hate the idea of holding gold and want income producing assets only. So for that situation if they wanted some geographic diversification, foreign property could fill part of that role.
Downsides of course is maintenance, upkeep, management of tenants if you use them, navigating local real estate laws and taxes, lack of liquidity, etc. That's where gold has real estate beat, it's simpler. However gold may be easier to force repatriation because it is so liquid. All these are extreme considerations though.
This post reflects a misunderstanding of what many members here believe.goodasgold wrote: Of course, if (like a lot of folks on this board) you believe that massive and growing unfunded liabilities do not exist, or never need to be repaid, or can be paid by merely issuing a "trillion dollar platinum coin," then there is nothing to worry about.
I would not say that govt is constraint by inflation, govt creates inflation because it profits from it.MediumTex wrote: In any fiat currency arrangement, the government is ALWAYS constrained by inflation.
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You might say "but those stupid monetary policies are precursors to other bad things" or "the stupid monetary policies are canaries in the coal mine", and that may be true, but PP investors are already protected against whatever bad things might follow from stupid monetary policies, so what's the point in worrying about that, especially before it has even happened, and especially considering that the cause and effect relationship between inflation and stupid monetary policies over the last 30 years has been questionable at best.
They are most certainly constrained by inflation. Otherwise you believe that can inflate to any amount or price level without negative consequence to themselves. This is obviously untrue.Rien wrote:I would not say that govt is constraint by inflation, govt creates inflation because it profits from it.MediumTex wrote: In any fiat currency arrangement, the government is ALWAYS constrained by inflation.
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You might say "but those stupid monetary policies are precursors to other bad things" or "the stupid monetary policies are canaries in the coal mine", and that may be true, but PP investors are already protected against whatever bad things might follow from stupid monetary policies, so what's the point in worrying about that, especially before it has even happened, and especially considering that the cause and effect relationship between inflation and stupid monetary policies over the last 30 years has been questionable at best.
I have a fire insurance on my home, but that does not mean that I am careless about fire in the house. Yes, I am "protected" against total loss if a fire happens, but if I can avoid that fire then I will surely do so.
You seem to contradict yourself, because if govt are constraint by inflation they surely cannot create massive inflation?Kshartle wrote:They are most certainly constrained by inflation. Otherwise you believe that can inflate to any amount or price level without negative consequence to themselves. This is obviously untrue.Rien wrote: I would not say that govt is constraint by inflation, govt creates inflation because it profits from it.
I have a fire insurance on my home, but that does not mean that I am careless about fire in the house. Yes, I am "protected" against total loss if a fire happens, but if I can avoid that fire then I will surely do so.
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I think they will be forced into either massive inflation or outright default at some time in the future and once that happens (even if it's a long-time from now) the losses will be so big it will wipe out anything that preceeded it for years.
How does the NSA help the government finance anything? Destroying the goose that lays the golden egg will not save them in the long-run.Rien wrote:You seem to contradict yourself, because if govt are constraint by inflation they surely cannot create massive inflation?Kshartle wrote:They are most certainly constrained by inflation. Otherwise you believe that can inflate to any amount or price level without negative consequence to themselves. This is obviously untrue.Rien wrote: I would not say that govt is constraint by inflation, govt creates inflation because it profits from it.
I have a fire insurance on my home, but that does not mean that I am careless about fire in the house. Yes, I am "protected" against total loss if a fire happens, but if I can avoid that fire then I will surely do so.
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I think they will be forced into either massive inflation or outright default at some time in the future and once that happens (even if it's a long-time from now) the losses will be so big it will wipe out anything that preceeded it for years.
Btw I am more on Armstrongs line: He believes that govt will crack down on the populace in order to finance itself. They would rather destroy all private ownership than hyper inflate. The signs of this crackdown are all around you. The NSA is just the tip of the iceberg.
Not trying to get into another argument here, but I am simply stating the counter-argument to that position.Kshartle wrote:This is why I submit that if they are in fact constrained by inflation (which they are), then there is also default risk to their debt. You can't say they don't have default risk because they can always inflate and then admit their is some level of inflating that would put them in a worse position and they would be unlikely to go that route. That is a self-contradicting statement and that means it must be incorrect.
If they cannot inflate indefinately without suffering negative consequences they might not do it and that means their debt is not 100% riskless in terms of a nominal principle default.
This is also what I've been saying about bonds and why I choose to not own them at the present time. I think they will be forced into either massive inflation or outright default at some time in the future and once that happens (even if it's a long-time from now) the losses will be so big it will wipe out anything that preceeded it for years.
Those of us who don't buy into the exploding-base-money-supply-equals-inflation argument are simply looking at the larger pile of private sector assets that fully represent our purchasing power in the economy. Even if the government has to print like crazy to pay its bills, we just don't see the money printing as being large enough compared to the amount of money-like assets that are created by banks / private credit / shadow banking.Cullen Roche wrote:Like most of the economic schools in existence today, Austrian Economics is predicated on a political ideology. Austrians tend to be vehemently anti-government and pro-market. So they build a world view that conforms to the world they want and not the world we actually have...
Austrian economists actually change the definition of inflation to serve their own ideological needs. In Austrian Economics inflation is not the standard economics concept of a rise in the price level. Inflation in Austrian economics is just a rise in the amount of money. This leads to all sorts of emotional commentary, the most common of which, is the idea that the USD has declined 95% since the creation of the Fed in 1913 (which is true). But this misunderstands several concepts and misleads us in understanding how the monetary system works.
First of all, the private sector creates lots of “money like”? instruments that are not technically included in the money supply but comprise the vast majority of private sector net worth. I use a “scale of moneyness”? to help better understand this concept so that we don’t place an undue specialness on the idea of “money”? when trying to understand inflation. Instead, I try to explain that spending is a function of income relative to desired saving. And that saving is comprised not only of “money”?, but money-like instruments like stocks, bonds, options, etc. To completely understand how the economy is impacted by inflation we shouldn’t merely focus on narrow definitions of “money”?, but should understand the aggregate economic balance sheet. For instance, if you sell a stock at no gain and obtain cash you’re not necessarily more likely to spend than you were before because your net worth is the same. Your income relative to desired saving is precisely the same as it was before. This is basically what QE is. It is a swap of one type of asset for another and doesn’t actually alter the net worth of the private sector. Changing the moneyness of private assets does not necessarily mean there will be higher inflation!
But there is a more egregious and nefarious error in this “decline”? of the dollar myth. It completely misunderstands how living standards can rise even while the money supply rises. In our credit based monetary system the money supply rises primarily when banks make loans which create deposits. In a highly productive economic environment these loans are distributed by private competitive banks and provide the borrower with the capability to invest in a manner that actually enhances the living standards of society. So, you borrow $100,000 from the bank, you invent and distribute the washing machine and suddenly we’re all better off because we no longer have to go to the river to wash clothes. The technological advancement enhances our lives by giving us more time to consume and produce OTHER goods and services. In other words, the money supply has technically increased, but we’re not worse off because of it. We’re better off because of it! What’s happened since 1913 in the USA is just one gigantic version of the washing machine example where our living standards have exploded through the roof in tandem with a rising level of credit and an innovation boom that human beings have never come close to experiencing in the past.
Austrians, in their fervor to demonize the fiat money system, make several errors here. First, they assume the government controls the money supply (which they don’t). It’s actually controlled primarily by private banks in a market system that Austrians should love. Second, they move the goal posts on the definition of inflation to imply that inflation is always and everywhere a bad thing (which, it can be, but generally isn’t).
That really just scratches the surface on some of the flaws in Austrian Economics. I think Austrians provide some good insights on the way the economy and money works, but these are glaring flaws in the school of thought that render it highly inadequate in helping us understand the world of money in a balanced and objective way.
Source: http://pragcap.com/understanding-why-au ... -is-flawed
If I was unclear I apologize. I don't think they have to take one route or the other, I just think it will. I think they could sell assets (I believe this was Browne's plan if elected) and purchase annuities for all the dependants and just stop taking on new ones.Gumby wrote: The logic that the US must choose between inflation and default......
Personally, I have no interest in politics, so for me I'm looking at all this purely for investment allocation purposes.
Right. I agree. They will almost always choose to print rather than sell assets (unless they have absolutely no need for an asset and believe that it will benefit the private sector). From the government's perspective, it doesn't really become any richer by selling its assets because a fiat government is technically neither rich or poor in terms of the currency it creates.Kshartle wrote:If your belief is that expansion of the base money supply or whatever is not by it's nature inflationary then you can logically come to the conclusion that they will ALWAYS choose to print rather than ever overtly default.
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[/align]Agreed. Harry Browne knew that inflation wasn't just about printing money — which is why he understood that the bonds are the least risky place to hold highly liquid dollar-denominated money-like assets. He was far more worried about the risks to private credit.Kshartle wrote:My point was a person cannot assume that printing money results in damaging inflation, thereby constraining the government/FED and make the assumption the bonds are risk free because they will always print. The two concepts don't mix.
This may be a language thing (I am Dutch)Kshartle wrote:I am certainly not contradicting myself.
You said "because if govt are constraint by inflation they surely cannot create massive inflation?"
That's like saying because a guy is constrained by gravity plunging him to his death he surely cannot jump off a bridge. He still can get out of all him problems by jumping, it's just the problem created here (his death) might force him to just accept the other ones instead.
Exactly. So far QE has mostly gone into book keeping entries, not into the pockets of the people.Gumby wrote: And despite all the recent money printing from the government, most people just don't have lots of disposable income to throw around.
Rien wrote: This may be a language thing (I am Dutch)
Constraint by = The state of being restricted or confined within prescribed bounds.
It seems to me that if govt can create inflation or hyperinflation then they cannot also be constraint by it.
Completely understand your point now. They can create inflation or hyperinflation yes. The negative consequences are what constrain them in my mind. It is a language issue and I was perhaps not as literall with my use of the word constraint.Rien wrote: This may be a language thing (I am Dutch)
Constraint by = The state of being restricted or confined within prescribed bounds.
It seems to me that if govt can create inflation or hyperinflation then they cannot also be constraint by it.