no i didn't even look at dc's link to be honest i just meant "You my friend are riding shotgun on a train towards a brick wall. The crazy part; is you have no idea who is driving." lol

And so moderate he won't stick his neck out on anything. Like telling us how he did on the Pew Center News IQ test. Or telling us whether he would support Clinton or not against Obama.

speculation is about holding goods, hoping the prizes goes up.

so if you buy silver, and hold on to it, you are reducing the volume of silver in the marked, and thereby artefically increasing the prize, then when you release it back to the marked the prizes will be unaturally low for a short period of time. you being an austrian should really know how bad arteficial prizing is. it does destroy jobs.

maybe some company end up going bankrupt because they cannot afford the silver (at arteficially high prizes) they need to make the electronics, or some other company cannot upgrade the computersystem as often as they should because the prizes are too high.

there will be malinvestmens in the silvermining industry, because the prizes are too high.

this all fits perfectly with austrian boom theory.


if the prize of silver becomes to low, because of speculation. this can happen several ways, maybe one of the metals usually combined with silver in the industry has artificially high prizes, therefor reducing the demand of silver, or someone is dumping silver, or some company is chosing not to go into using silver, when they would have if the prizes where correctly

then, that will lead to an underproduction of silver, which in turn will hurt the entire industrial marked.


just think about it, if you make money of speculation, you are getting those money from somewhere, they just did not magically appear, and usually it is the people using the product that will pay the prize for speculators. and it is even worse, usually it will reduce productivity, so every dollar made in speculation could cost as much as 1000 dollars on a sociatal level.

speculation is the practice of buying for the short term investment, hoping to make a buck of the fluctuation of the marked, and nowadays I heard tat 95% of the investment are done with speculation as the motive, not the actual value of what is bought.


same kinds of damage scenario can be made will everything you can buy on the stockmarked. because you are a smalltime investor, the damage caused by your investments are miniman to noneexitant, because small time investors usualy try to buy for value, not for speculation. it is the bigtime that really hurts



http://www.youtube.com/watch?v=WJnMia2rARI

if you look up elliot wave theory, here he talks about margins are the lowest they had ever been, the increase in the marked was mainly speeculation, bubbles is people loaning money to speculate.

The silver speculating is taking on risk, which is passed over to him from the counterparty, who might be an electronics manufacturer who is hedging on silver. Later, when the speculator resells his silver at a higher price, it is not the electronics firm who is hurt. The electronics firm was helped by the speculator because the speculator is obligated to deliver the silver to the electronics firm at the original price which is locked in.

Like reserving a plane ticket or hotel room ahead of time to lock in the price.

skrum

what you are descring is how the trade works, it was origially set up to prevent good harvests from making farmers go broke, in netherlands, and still, they had death penalty for speculation.


speculation will drive up or down the short term marked, and in general make the LONGTERM prizes wrong.
it is like locking the intrest on your house, the more the marked goes up an down, the higher prize the bank will take.

lets say expected average over the period is 5%, then you might be able to get it at 5.1% if the marked is stable, but if the marked can go up to 20% and down to 0%, then the bank can chose to take 5.5 % for the same service. if you could afford it, it would always be better for you NOT to lock the prizes, but because the marked is so dangerous, you have to.

if you make this analogy to the electornics firm, then they are overpaying to lock the prizes, and if the speculator makes money, it comes out of the electronics firms pocked. the more dangerous the speculator makes the marked, the more money will be force to lock, and the more the speculator can earn.

now, you look at the marked we have today, and we have huge companies manipulating the silver prizes to gain money from speculating.

it is especially short term speculation that is dangerous and damaging.


and skrum, the main point is that speculating makes the prizes unnatural, LONG TERM, wrong prizing on any goods will lead to malinvestment from the society and over/under production of other goods an services.

if you just read kreuz's statement and were like, wtf, i dont understand anything....

please substitute "market" for "marked". took me awhile to figure that out. still great english ofc.

And replace "prices" with "prizes" makes the reading extra fun; kinda like a treasure hunt.

Mrk; I don't even know where to start. I'm not sure it is even necessary for me to respond; if that's what you think; then go ahead and believe that.

You have to overpay, compared to the spot price, to lock in a buyer price. That's because you are transferring risk. That's also why riskier borrowers have to pay a risk premium.

skrum, if the marked is going more up and down than it should, then the price of risk transfer will be higher than it should

The price of risk transfer is set at the time of the hedge, not later. When the speculator delivers, the price is not lower than it "should" be because that was the price that was agreed upon. The delivery is not forcing the spot price down unnaturally because the delivery is not part of the market.