Cost of living crisis. What crisis?

[BillyStubbsTears]

I was so certain that you were right that house prices would go down and gold prices would go up, that I re-mortgaged my house to get £150k of liquid capital and I put the lot on gold. With the plan that I could handle the increased mortgage payments for a couple of years, then I'd cash the gold in, pay off the mortgage and retire to a life of sybaritic excess.  Instead, I have lost £50k and am now unable to keep up the payments on my increased mortgage. I am about to lose my house and I've sold my kids off into private service.

Thanks a f***ing million for the advice.

Like I say, you are demonstrably financially illiterate. Why didn't you use savings to buy gold? Why not consider it a long term investment? Why not downsize to an affordable house instead of letting the bank sell it off for a song? Why have kids when you clearly couldn't afford it?

You really are a silly Billy.

Why should I have done that Oh Master Mick? You told us from your very own sacred mouth that house prices would go down and gold would go up.

So it was f**king obvious to us mere mortals to leverage our houses to buy gold. What could have been more obvious, Oh Master Mick?

[IC1967]

Governments are debasing their currency? How is this different to inflation?

Normally this would cause inflation. However there is one major factor that everyone except me seems to be taking seriously. Demographics. An ageing population means less spending power in the economy and this has a greater effect on keeping inflation down than debasing a currency does on increasing inflation.

[RedJ]

Tell me, Mick, are you a keen fisherman?

[River Don]

Governments are debasing their currency? How is this different to inflation?

Normally this would cause inflation. However there is one major factor that everyone except me seems to be taking seriously. Demographics. An ageing population means less spending power in the economy and this has a greater effect on keeping inflation down than debasing a currency does on increasing inflation.

So why buy gold?

[IC1967]

Why should I have done that Oh Master Mick? You told us from your very own sacred mouth that house prices would go down and gold would go up.

So it was f***ing obvious to us mere mortals to leverage our houses to buy gold. What could have been more obvious, Oh Master Mick?

Look. You are obviously a short term merchant. I on the other hand am a long term merchant. Just because we have had a blip in house prices doesn't mean that they won't go down in the medium to long term. When deflation hits next year just see what that does to house prices.

I would not advise leveraging your house for short term gain. You were stupid to do that. You should only have used savings (however you strike me as someone that likes to spend every penny he ever gets). The savings should have been money you could afford to lose. Any savvy investor knows there is always a risk with any investment.

So I repeat. Long term house prices will fall and gold will go up. I will be around to benefit whereas I fear for you and your poor unfortunate family as to what the future holds. You sir are a reckless gambler and you need help.

[IC1967]

Tell me, Mick, are you a keen fisherman?

I see where you are coming from. However as stated on another thread, I view fishing as a barbaric so called 'sport'.

[River Don]

Why will gold go up if you expect deflation?

[IC1967]

So why buy gold?

Because it will be one of only a few asset classes that will have any real value.

[River Don]

So why buy gold?

Because it will be one of only a few asset classes that will have any real value.

I agree. Because fiat money is being devalued and we'll see... Inflation?

[BillyStubbsTears]

Got you Mick.

So when you last told us to "get into Gold", what you REALLY meant was "just put a sensible, losable amount on gold because it's likely to go tits up over the next two years."

A bit like when you suggested that folk follow you lead by putting £2,000 on Next Week's Dog Meat in the National eh?

Hang on. I've got it! When you told us to buy gold in 2012, it was one of your spiffing jokes, wasn't it?

[IC1967]

I agree. Because fiat money is being devalued and we'll see... Inflation?

There are currently deflationary and inflationary forces at work. I believe that because of the ageing populations of the mature economies that deflation is going to win over inflation. This battle is already being won if you just look at what is happening in Europe. Many countries are already experiencing deflation. In the UK despite loads of QE (which is very inflationary) inflation is falling. Why? Demographics is the reason. It seems I'm the only one that realises it though.

[River Don]

I agree. Because fiat money is being devalued and we'll see... Inflation?

There are currently deflationary and inflationary forces at work. I believe that because of the ageing populations of the mature economies that deflation is going to win over inflation. This battle is already being won if you just look at what is happening in Europe. Many countries are already experiencing deflation. In the UK despite loads of QE (which is very inflationary) inflation is falling. Why? Demographics is the reason. It seems I'm the only one that realises it though.

Okay, so why not keep your money in pounds sterling? Why buy gold?

[IC1967]

So when you last told us to "get into Gold", what you REALLY meant was "just put a sensible, losable amount on gold because it's likely to go tits up over the next two years."

No. Like any sensible investor money should be drip fed into any investment to iron out the peaks and troughs. By doing this, by buying in the troughs as well as at the top of the market you will make long term gains. You seem to think 2 years is a long time. I've got news for you. 10 years is much nearer the mark.

A bit like when you suggested that folk follow you lead by putting £2,000 on Next Week's Dog Meat in the National eh?

No. I said I was going to put that amount on. I advised much smaller stakes for the less affluent.

Hang on. I've got it! When you told us to buy gold in 2012, it was one of your spiffing jokes, wasn't it?

No. It was sound financial advice for the long term.

[IC1967]

Okay, so why not keep your money in pounds sterling? Why buy gold?

Because when the markets wise up to full horror of the unsustainable size of our national debt, sterling will take a real pounding.

[River Don]

Okay, so why not keep your money in pounds sterling? Why buy gold?

Because when the markets wise up to full horror of the unsustainable size of our national debt, sterling will take a real pounding.

How does that balance out against demographics?

Are you expecting inflation or deflation?

Buying gold suggests you're expecting inflation.

[Glyn_Wigley]

Governments are debasing their currency? How is this different to inflation?

It isn't different at all. Inflation is the rate at which a currency loses it's value. Price indices are merely a tool to try and measure that rate, and are not inflation itself. But Mick doesn't know that, as he keeps repeatedly showing us.

[Glyn_Wigley]

Okay, so why not keep your money in pounds sterling? Why buy gold?

Because when the markets wise up to full horror of the unsustainable size of our national debt, sterling will take a real pounding.

And when that happens the currency will lose it's value, presumably at an alarming rate...ie the very definition of inflation. QED - or as you usually trot out, game set and match.

[IC1967]

How does that balance out against demographics?

Are you expecting inflation or deflation?

Buying gold suggests you're expecting inflation.

I am a long term investor i.e. 10 years plus. Billy is a speculator. There is a world of difference. Now alhough I consider myself to be a pre-eminent economist I don't have a crystal ball. All I can do is look at what is happening now and use my expertise to reasonably predict the future. It is staring us in the face that we are entering a deflationary spiral. It's a no brainer.

Under the 'old' rules of economics we should be experiencing high inflation given all the QE and debasing of currencies that has gone on over the last few years on an unprecedented scale. You have to ask yourself why hasn't it happened and why is the opposite taking place. The answer is demographics. An ageing population is deflationary and massively trumps any other factor in the economy. Until the populations of the world's mature ageing economies are rebalanced then this will keep inflation down.

Luckily for us we have seen a lot of immigration and a rising birth rate as a consequence. We need to encourage many more young people to come to our country and to have babies. Eventually our ageing population will not be as big a problem and we will then experience inflation again.

So to summarise. I expect deflation/low inflation for about 10 years. I then expect inflation. Gold is my hedge against both scenarios.

[IC1967]

And when that happens the currency will lose it's value, presumably at an alarming rate...ie the very definition of inflation. QED - or as you usually trot out, game set and match.

You are trotting out the 'old' rules of economics. You really must stop trying to live in the past and come into the present and look to the future. You have your head in the sand and are totally oblivious to the effects of demographics. Under your old rules we should be experiencing high inflation. The opposite is true. You need to explain why. I have already done so. If you disagree then you need to say why, otherwise you have nothing to contribute to the debate other than your usual pedantry.

[IC1967]

Inflation is the rate at which a currency loses it's value.

I much prefer my definition to yours.

Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.

[River Don]

We live on a planet where the population is still rising, and large parts of the population are striving to improve their living standards, we see populations in China and India wishing to motorise, we see them wanting to eat a diet richer in meat for instance. Don't we? This state of affairs is set to remain for a good thirty years.

At the same time our primary resource, oil has seen it's production rate plateau. Not only that but to maintain that output level we seeing old cheaper conventional oil rescources replaced by more expensive sources of oil, deep water drilling, fracking. We are having to burn ever more oil just to extract that hard to find oil. Running ever faster just to stand still. All this makes oil expensive. If oil is expensive, everything else is expensive, particularly food, since food production is highly mechanised.

In a globalised world we see lots of people chasing after increasingly scarce and therefore expensive resources. Inflation.

[IC1967]

There is logic to your argument however I feel you are talking about how it used to be to some extent. Shale gas in America is a game changer in terms of oil and other fuels. Modern technology will also continue to lessen our dependence on oil. Short term, oil does have an impact but this is going to lessen over time.

However there is one thing that cannot be changed so quickly. Demographics. We have sleep walked into this crisis and it is going to take decades to sort out. That is if our political masters will ever start to think about the long term instead of always concentrating on short term political gain.

It is a fact that emerging economies (with young populations) experience high inflation and mature old economies (with old populations) experience low inflation or even deflation.

Have a look at this league table. By and large it is the countries with young populations that have high inflation and countries with old populations that have low inflation.

http://www.aneki.com/inflation.html?number=all

Have a look at page 22 of this report to see which areas of the world have the youngest populations. You will see that this broadly corresponds to the previous league table in terms of where inflation is high or low.

http://www.un.org/esa/population/publications/WPA2009/WPA2009_WorkingPaper.pdf

[River Don]

Franking is a short term sticking plaster.

In the old days we could drill a hole in the sand and out would come lots of free oil. Then they would build a pipeline and that oil could be harvested for decades and lots of jumped up little Saudi princelings became fabulously wealthy.

Fracking involves trucking lots of water and stuff all over the place, using lots of oil, then you have to pump that water under pressure, using oil. Then you have to load up your hydrocarbons and truck them somewhere before you can burn them and release energy. And a fracking play only lasts a few short years before it runs dry. Then you start again.

By comparison fracking is very expensive and inefficient. Its use only highlights our desperation.

Oil prices have to be maintained above $100 pb just to keep fracking viable.

Fracking ain't the answer.

[River Don]

Looking at your list IC, It's also the poorer nations who experience high inflation, while the more wealthy nations experience lower inflation.

Those with a low GDP per capita like Ethiopia are close to the top of the inflation league. Granted they have a low median age.

But because they are poorer a far larger proportion of their income is spent on essentials. Food and fuel. When those essential commodities become more expensive, they have a much higher exposure to that inflation because they take a much, much higher share of the consumption basket.

This is why we saw uprisings right across North Africa and the middle east when the price of food really started to become highly problematic.

The west has also been exporting it's inflation. All that hot money handed out by the central banks has been invested in emerging markets in a search of higher returns.

[IC1967]

I agree there are other factors that contribute to inflation. I contend that demographics dwarfs all other factors. My theory even goes back to Roman times.

http://armstrongeconomics.com/2013/04/07/inflation-population-are-key-factors/

[BillyStubbsTears]

Mick, that just takes the biscuit.

As Mick v2.0, you used to point us to the rabid ramblings of Peter Schiff.

The Peter Schiff who told us time and time again from 2008 onwards that manic Zimbabwe-style hyperinflation was coming as a result of QE. Just wait. It's coming next year. Or maybe  the year after.....or perhaps the one after that.

The Peter Schiff who now tells us that deflation is coming and it will be great.

The Peter Schiff who predicted in December 2011 that American share prices would fall heavily relative to the price of gold in 2012 (They went up by about 25%)

The Peter Schiff who told us to get into gold in 2012 because inflation was coming and the price of gold would go from $1800/oz to $5000/oz in two or three years. (It's currently at about $1200/oz).

That was who Mick v2.0 relied on. A man proven time and time again by the facts to be utterly ignorant of how the economy works. But a man whose ramblings are repeated by a million right wing nut jobs.

But Mick v3.0 has ditched Peter Schiff.  Now he's using Martin Armstrong as his adviser. That's the Martin Armstrong who is a convicted felon, having served 5 years for his masterminding of a huge financial fraud. That's the Martin Armstrong who believes that all Governments are evil Marxist conspiracies to enslave and pauperise the people. That's the Martin Armstrong who claims to have discovered a cycle of economic boom and bust with a period of 3141 days. Because 3141 is pi x 1000.

A raving headcase, listened to only by the gullible and the vulnerable.

[IC1967]

This article is worth reading. I agree with a lot of what Mr Dent says but I think he's got it badly wrong about gold.

http://www.marketoracle.co.uk/Article44022.html

[River Don]

I agree there are other factors that contribute to inflation. I contend that demographics dwarfs all other factors. My theory even goes back to Roman times.

http://armstrongeconomics.com/2013/04/07/inflation-population-are-key-factors/

There will be an effect when global population starts to fall and age but that still isn't due for a good while yet.

Of more immediate concern are our energy problems. Things are supposed to get cheaper and more plentiful when there is great demand for it. Not in this case I'm afraid.

http://www.countercurrents.org/heinberg250913.htm

[IC1967]

Look Billy, you need to try and be more constructive. When you lose the argument you always go into character assassination mode. No-one is perfect, least of all you, so I think you are being overly harsh on Mr Schiff and Armstrong. If I did a character assassination job on you, I'd be here all day.

[Filo]

I'd like to see a character assassination job on BST, have you got the b*llocks to do it Mick?