Replies to post #342646 on Zeev's Turnips Patch-No Politics (ZEEV)

[westpacific]

WFMI going down, to $90

[ItsAllCyclical]

(edit) Ain't going to happen. Were you calling for 340 gold when gold was 450+ just recently? If so I'll take your prediction more seriously, if not you're a good sentiment indicator. 340 is certainly possible, but the probability here is very low imho. I think the most likely scenario is a retest of 400/405 with 380/390 being possible, but far less probable. I'm thinking the Dollar index craps out around 87-88 with at most 90.

We do have one thing in common. We're both short WFMI here.

[basserdan]

Gold 340, bet on it.
Its called D E F L A T I O N
Gold hates it, and cash loves it.
Got hard cash.
Now on the next bottom get rid of the cash, but the big fall for this big American dollar is a few years away.
===============================================================

Yeah right!
That was then.... this is now!

Richard Russell tol' me so. <g>

I want to talk about one possibility -- or let's call it one problem. For the sake of argument, let's say that the Fed fails in its frantic attempt to keep the nation on the inflation path. Let's say that the unthinkable happens -- the nation sinks into deflation.

During the early '30s the ideal place to be was in dollars. At that time the dollar was widely believed to be "as good as gold." The only problem was that nobody had any dollars. I was there, and I can tell you -- during the 1930s dollars were very damn scarce. You'd work your fannie off on a job (assuming you could find one) for fifteen to twenty of those scarce dollars a week (and as a teen-ager, that's exactly what I did). In the 1930s if a man could make five-thousand bucks a year he was one satisfied citizen, believe me, he was.

But as I said, back in the '30s there were absolutely no doubts about the dollar itself. The dollar was as solid as a bar of gold.

Now let's take it to today. If we get deflation in the months or years ahead, there are going to be grave doubts about today's paper, fiat dollar. Heck, there are already doubts about the dollar and trouble hasn't even hit yet. Can you imagine what the sentiment towards the dollar might be if this country starts sinking into deflation -- this country with its total of $32 trillion in debt of all kinds and varieties?

If deflation does enter the picture, I believe we would see an absolute panic for real money -- gold. With everything around us going bankrupts because of unsustainable debt, gold would shine like, well, like gold.

Anyway, there is one point I want to clear up. The dollar today is an entirely different dollar than the dollar of the 1930s. The 1930s dollar was a solid, gold-backed dollar. Today's "dollar" is a piece of paper worth nothing but the Treasury's edict that the dollar will serve, by fiat, to pay off all debts.

http://www.dowtheoryletters.com/dtlol.nsf