Faber on the economy.

I mostly agree.  I am surprised that the market didn't go south at the open today.  I think a lot of people either don't believe the seriousness of the situation or are too scared to do anything at all.

I disagree with some of it.  Yes, rebounds should be viewed as selling opportunities, and yes, government paper is worthless.  But in a total collapse you don't want to be in cash?  I suppose that depends on how much cash Faber means.  The piddling amount I can raise is chump-change to most people but that's exactly where I want to be.  We of what used to be the middle class are facing a financial lockdown.  There are no part-time jobs available anymore and the value of our homes is falling.  Because home ownership is at its lowest point since 1965 and will not recover in decades, we on limited incomes will be stuck in our homes when the value decreases below a certain amount and we will not be able to qualify for loans – even if we did, the interest rates will soon be astronomical.  People will sell their homes at a loss just for food money, which will run out eventually – if the food doesn't run out first.  So if I can take the cash out now, when the value of the home falls again, I will have choices.  I won't be stuck without a way of monetizing my equity.

Faber also talks about precious metals as a hedge and suggests that (1) they are overbought and (2) corrections are buying opportunities as people begin to shun paper assets.  Those are contradictory statements and nonsense unless something, somewhere, is pegged to metal.  You cannot eat silver or gold and individual investors can never buy enough to make a difference in a collapse.  He implies – or at least I inferred -that by 'war', he didn't mean another Afghanistan-type adventure.  

If OUR economy collapses, what good is ten pounds of gold bars in a safety deposit box?  When the bank closes, you aren't going to get it – or fifty pounds of silver quarters buried in the back yard?  People somehow think those things will buy them out of disaster.  But no amount of gold can buy products that simply aren't available and neither silver nor gold are effectively 'money' if everyone doesn't have some and there is a universal and easily understood standard of value for them.  Otherwise, they are either worth their face value or their weight in whatever commodity you want to buy.  

See, when people pay $1,600 for an ounce of gold, what is in their mind is preserving the buying power of that $1,600.  So if the economy goes bad, they will bring me that ounce of gold and expect it to be worth $1,600 and I'll think it's worth two chickens.  We immediately have a misunderstanding and we can't barter to a happy medium because I don't need the gold.  Paper money is hard to counterfeit. Silver and gold bullion isn't.  People who buy it on the basis if a printed certificate of authenticity are fools.  It might easily be lead dipped in molten silver or gold so it will pass a touchstone/acid test. But you don't know what it really is unless you melt it or x-ray it.  I can print certificates of authenticity all day long but I can't assay metal bars at the local farmer's market.  If you give someone a gold bar with a certificate they trust and they replace it with a chunk of lead and pass it on with that same certificate, then what?  

if the dollar isn't already pegged to a precious metal, and the value of that metal set as a national standard, the random price of the metal can't be a standard for trade and that can't happen because the US and all other countries have printed more money than exists metal to standardize it.  People who are buying precious metals, either as a hedge or as a lifeline are throwing their money away but they don't know what else to do.

“Precious metal' is whatever gives a government the most power.  Six thousand years ago it was gold – because gold would buy and feed armies – men who would walk hundreds of miles and fight with swords and spears.  Today, 'precious metal' looks like this.