I agree with the bears and gold bugs actually. Their theory and I guess mine now is that central banks have manipulated to the point that they are out of ammunition. Japan and EU even have negative interest rates which actually are hurting things and are damaging. They used these measures because they can't get any growth going. They are not effective and they are desperate and using experimental measures. The world is flooded with currency.
Bears and gold bugs theorize that central bank policy has hit a point that they are out of bullets and they will not be effective any longer holding back negative economies. They figure to buy gold/silver and mining companies as the the world drowns in flooded currencies their gold/silver and miners will rise greatly in value.
This is where I deffer from them. Maybe I am even more bearish then them. I think what if central banks' effectiveness has run the coarse so much to the point that deflation can't be held back any further. What if the financial system is threatened again like in 2008. If that happens then all equities will crash. Mining stocks are equities and they would crash. Deflation takes down the value of everything as that is the very definition and even gold and other metals would fall.
If there is to be banks failing and deflation as the conclusion then I don't want to own anything. I would want to short and only short anything and everything. I agree with the bears and gold bugs on their theory but I disagree with them on the proper actions one should maybe take.
When deflation comes everything falls. Even gold and silver can not go up because the demand is not there. Everyone is scared and many struggle greatly during those times. People do what they can to survive and feed and shelter their families. Gold and silver are not priorities. This was seen in 2008 as even gold dropped. Only once the bank bailout went through did it then go on a tear. Only after the banking system was saved. Not before and that is important.
I don't know if the theory will be right. I hope not. Deflation is very bad. Banking system being threatened is very bad. This time around central banks have already used all of their ammo. Not a good situation. They have none left. If growth doesn't start to get going then I will be troubled that deflation could come. I hope it doesn't. If it does though unlike the gold bugs that want to own mining stocks which are still equities I will not want to hold any stocks. I do not want any equities of any kind during a period of that sort. Towards the end of the deflation period then one should load up on stuff but not heading into a deflation period. If one believes a deflation period is coming.
Bottom line I kind of agree with the gold bugs thesis and unfortunately I see conditions that could lead to what they theorize could happen. Only thing is that if those things were to happen then deflation would come and I don't know why they would want to own any stocks of any kind if that is the case. Hopefully we get some growth in the world going and we don't get to a deflationary point. Deflation is bad bad bad and lets hope we don't see it but unfortunately things are kind of in place to some degree that it could come. I don't like at all what I see out of Japan or the EU. Terrible looking economies. I don't really like what I see in China as they have a monstrous credit bubble. US is by far in the best shape but leading indicators like GDP, consumer confidence, manufacturing etc etc have not been very good at all lately.
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