Thread: Gold Buying
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Old 13.10.2010, 13:46
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Re: Gold Buying

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Useful things... base metals, wine, diesel generators, fuel, ... really depends on your view on world stability and inflation rates. 'Things' that people will want/need at 0% inflation or 20% inflation.

I would imagine people buying gold bars own their house so they have a basis to borrow against - and currently cash in hand to buy the shiny yellow bits. Can always max out mortgage.

Failing that - unsecured rates are nothing compared to 20% rate fears ... in terms of house values - well - if rates go from now 2% to 20% then the liability of your outstanding fixed rate debt of 5yr:

exp(-5*0.02) = 90.5%
exp(-5*0.2) = 36%

So the house price would need to drop to about 40% of current level. At that point - the bank wont want it back. they will own all the houses from folks with floating rate mortgages.

FYI - I don't buy gold and i'm not borrowing to buy 'things'. It just seems a smarter approach if you believe in hyper inflation or instability.
Gold is used for a lot of things other than for jewellery, as is platinum.
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