Bazz

As you say I don't think TOTAL financial collapse is the scenario that Arjay was originally envisaging. If it was, we might as well go and live in a cave, because we would not be able to even barter. There would be no energy to even make the steel to make a common-a-garden hoe for the farmer to till his soil because there would be no common method of exchange let alone the energy to mine the ore Nothing like that happened in the last depression and it won't happen this time. What we are talking about is the collapse of the world currencies and eventual inflation. If you increase money supply, the inevitable result is inflation, unless it is saved and not spent and that is where the velocity of money comes in. At the moment people are cautious and not spending, but as the optimism rises and people dig into their pockets, as is beginning to happen around the world, the stock market rises. Fundamentals are the same and the amount owed is still the same and many countries have debts that exceed their annual GDP. The USA has an annual deficit of well over a trillion dollars and a total debt of some 16 trillion dollars. They can't even pay the interest on that let alone be able to cope with the unfunded liabilities of over 100 trillion dollars in the years ahead. Half of Italy's taxation income goes to pay interest on borrowed money and as for Japan - €11 trillion ($14.6 trillion). This corresponds to 230 percent of annual gross domestic product, a debt they have no way of paying back and is why their new Prime Minister Shinzo Abe is devaluing the Yen to the Yanks dismay. It is a race to the bottom because it is the only way to get rid of the debt bar default. Just debase it. I could go on but I think I have run out of space !

Snake,"Half of Italy's taxation goes towards interest on debt." 90% of that of that debt was created by private central banks with the click of a computer mouse.They were counterfeiting the Italian currency and loaning back to the people as debt.

I think the best precious metal is silver.Gold is 50 times the price of silver but silver is only 10 times more abundant than gold.The gold price is high because of tradition in jewelry and it looks really good on the hand of a woman.Gold in many ways is an emotional metal.

Silver is the best conductor below gold.48% of silver is used in electronics and is more expensive to retrive from electrical goods than just mining it out of the ground.By comparision to gold, silver should be trading at $280 per oz instead of $28 per oz.However this price ratio between gold and silver prices has been fairly constant for 100 yrs.Silver is far more unstable in price because far less is traded than gold,thus it is more easily manipulated.

However in a big crisis of currency depreciation, there will not be enough gold for people to use as a hedge against inflation,thus the price of silver must rise.

I've done my sums on dividing the price of gold into average weekly earnings.The ratio is much the same as in the Great Dpression and in 1950 as today.In 1950 gold was $ 35 per oz with average incomes of $1500.Ratio 43:1 Gold today $1550 per oz with average income of $65,000.Ratio 42:1.Looking at the todays ratios,precious metals are not over valued.However back in the 1950's gold was used as a backer for our paper money.

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There would be no energy to even make the steel to make a common-a-garden hoe for the farmer to till his soil because there would be no common method of exchange let alone the energy to mine the ore Nothing like that happened in the last depression and it won't happen this time.
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Snake, you're perhaps forgetting some of us have a greater knowledge than most when it comes to things like this. How many hoes do you want? And I wont even need a gas pipe or a refinery to make as many as you need. All I'll ask of you is that you give me spuds and tomatoes when in season. I'm sure we could come to an agreement that is mutually beneficial, no caves required :~)

The financial collapse will hit everyone when America descends into civil unrest. Americans are in this cyclic, paranoid, self defense mentality that is quite frightening. There's about 90 million of them that absolutely detest the attack on their constitution and the rights it affords them by what they perceive to be a treasonous, despotic, tyrannical leader, a lot that think he's an illegitimate one at that. A bit like our Juliar :)

Then you have a government hell bent on attacking their constitution, eroding their bill of rights and acting like an enemy of the people.

Now here's where the fun begins. The people are arming themselves to the teeth as their forefathers have forewarned them they need to do and gave them permission to do so, to remove such government.

Then you have a Government pooing its pants because their statistics are telling them that Americans who hate their government are on the increase and are a threat to their existence. So they're trying to quell this dissension by further attacking their constitution and bill of rights. And the cycle repeats.

One spark now and it will be on for young and old.

So what happens to the world and more to the point, Australia, when that spark is ignited?

Interesting times ahead!

Snake said;
I agree with you that food and energy are wealth, but what do you buy them with ?

You buy them with your labour, or with other skills you may have.
We are talking here of very local business.
For instance in the middle ages there were blacksmiths, thatchers and
many other trades.
I doubt if there will be a regression back that far but I do think a
move back to the 18th or 19th century is on the cards.
I doubt very much I will see it, but my grandchildren may well see it.

Money will be reestablished but in what form I can only guess.

Arjay....

I think we also need to take into account how gold was extracted during the great depression ,compared to how it's extracted today.

I don't know the exact difference, however I assume what took a month to mine back then, takes a day now.

Not sure what the effect is, but food for thought, as if something is easier to replace, it's often less valuable.

Bazz, I liken our life cycles to a clock face.

My late dad was born in the late 20's, during the depression and from all accounts, it was pretty tough. I call that twelve o'clock.

My sister was born mid 50's, then my brother, me four years latter, still pretty tough times. Let's say three o'clock.

By the late 70's many families were starting to become better off, they started to buy gadgets, times were pretty ok. Call that four o'clock.

My kids were born late 80's, early 90's and we had it pretty good,, they enjoyed a good upbringing till the mid 2000's Call that six o'clock.

My point is that we are now on our way back to the tough old days of twelve o'clock again, but as to how long it takes to get there I have no idea.

What I do know is that we now have far less (per capita) working full time, we have far more hanger onners and we have the illegal,s problem that if not stopped will bring twelve o'clock around much faster than we would like.

We also have a very heavily relied upon mining sector that won't last forever.

Now back to gold again.

Gold will only be valuable as a batter tool, if the recipient can afford to hold on to the gold, otherwise it will be useless in most cases and may as well be in the form of a live chicken, or a few dozen eggs.

Rawmustard,yu're right about a possible revolution ion the USA.There is now a concerted effort to disarm the US people.This is why Obama has distanced himeself from Israel who want to take Iran and Syria down.The USA cannot fight wars simultaneoulsy at home and abroad. They have to disarm the US people first and will take years.However will be really ineffective? They have not ruled out using drones on their own people.FEMA is amassing billions of rounds of amunition with thousands of armed vehicles at their disposal.There are also 800 empty FEMA camps that ar supposed to house illegal immigrants.There are over 15 million illegal immigrants in the USA but none are in these camps.

If a really big collapse happens,they'll probably go to war with Russia/China.

Note the RBA is building a fund to bail out our banks.Presently it is about half a billion $.How do they bail out $ 19 trillion worth of derivatives? Even the housing loans counted as assets but the land is 50% over valued.Bank shares are supported by money printing.So the RBA like the other central banks are going to depreciate our currency to bail out bankers.