Pericles

At the moment there is very little return on bonds and fixed interest, so people turn to gold as an alternative until they see the base rate go up or a better investment. The way the world is going commodities seem to be the best bet.

There are some interesting inflation calculators on line and over the last 40 years it requires 5 times the amount of money in purchasing power due to inflation. Here I am discussing store of value (not unlike housing and why people invest in them)and not wages which tend to keep pace.

The reason that Warren Buffett doesn't like gold is because he is clever enough to be able to get a return on his money greater than inflation. So he has no interest in putting his deflating currency into an inert lump of metal.Although in the past he has invested in silver. Many people want to save their hard earned and look for somewhere to put it. Gold is one place that keeps pace without investing in production.

gold and silver cant ever be put back into coin
but their inflation adjusted value can be restored
*back into its face values

we know inflation has devalued..the bying power of a 'dollar'
so lets return back..to 1966..when coin was still silver

the 65 threeopence piece
bought a bottle of coke
[plus got a penny back for the empty bottle

it contained 1.41 grams of silver

today worth the same..in the weight of silver
but today costing over 2 bucks

this reveals how the value has been stolen..from the coin/age

deflated..via the fiat paper/plastic note franchise system
the only fair thing to do is revalue the coin

[to what it should have been..had the silver not been stolen
like the gold was before it[and like the copper was stolen..
when a one cent coin..cost 5 cents of copper..

restore the value on its face
not the gold content

value the coin AS IF..the nickle weight
was in real silver gold..but only the face values change

how can they be so clever?":
quantive easing in euro's now lol

too easy...former govt reseves..lends you cash at one percent
you the banko..lend out as credit on a credit card..for 20%[or micro credit for 30/40%][to the poor][only further impoverished..by high ursury

easy money
how do you sleep at night

Pericles

In a previous post you asked me about CDS being triggered.

This web site

http://dealbook.nytimes.com/2012/03/01/greek-crisis-may-test-the-value-of-swaps/?emc=eta1

dated March 1st not only explains the current problem in Greece over Credit Default Swaps and how they might, or might not be triggered, but also illustrates the complicated involvement that I could not possibly attempt to explain. Good luck !

The European Central Bank has made 529.5 billion euros ($A664.03 billion) in low-interest loans to banks in the second round of a massive credit infusion. The offer of credit for 3 years was taken up on Wednesday by 800 banks. The uptake was modestly higher than the 489 billion euros handed out to 523 banks at a first offering on December 21. Banks used some of the money from the first round of loans to buy government bonds.
A GFC can be a real winner. Borrow it at 1% and re-lend at 6%, does wonders for the bottom line. Considering the people you are re-lending too are the very same people you borrowed it off in the first place. Considering you created the GFC its great to get the innocent to pay for your mistakes. The wonders and joys of Capitalism, its all win win as they like to say.

Thanks for the article, snake.

Some light can be shed on their impact by looking at the headline numbers.

"Just over $70 billion of default swaps exist on Greek government debt. After subtracting swaps that pay out on a default from those that get paid, the net amount is $3.25 billion."

The actual "impact" is therefore around under 5% of the face value of the CDSs themselves. When you compare this with the pain of losing 50-70% of the value of a government bond - and it is the Banks who take this pain, by the way - you can begin to see that numbers like "$35 trillion in credit default swaps in the West" - which is where we started - are in fact unrelated to the underlying economic risk.

This might also help.

http://www.economist.com/node/21548232

There's more, if you are interested - this edition carries a full "Special Report" on the world of derivatives and other financial innovations. It should serve to reduce your concerns a touch.

I'd also point out that no-one would actually bury currency notes and dig them up later, and expect them to be worth as much as gold. But using the money actively by investing it, most certainly could.

Paul 1045 & Pericles

I had a look at the article. Thanks Pericles. It all goes to show what I tried to indicate previously about the whole GFC which is so interwoven with CDOs and CDSs which have been interchanged so many times no one seems to know the source, particularly the former which have been bundled with all sorts of toxic securities which the rating agencies originally listed as triple A. Now the legal challenge over the actual reponsibility and liability of the holders of the swaps that even if paid, could create precedents over many more in other European countries, apart from Greece, which could be infected.

Interestingly enough, there are a number of articles on LTROs (QE by any other name) and such like, in the business section of this week's Weekend Australian and how a large percentage is being used in the Carry Trade.
It appears to me that the banks have got far too large and powerful so that politically they have to be constantly propped up by governments, when perhaps the should go the way of Lehman Brothers. At the moment they are being allowed to get away with what would otherwise be considered illegal.

Incidentally, do either of you guys follow Nigel Farage who is the British representative in the European parliament. There are several Youtube clips of him addressing the assembly which I think you would find interesting. This one

http://www.youtube.com/watch?v=2gm9q8uabTs

is a couple of years old, but very prescient. There are others there too.