Sunday, September 26, 2010

Gold is the final refuge against universal currency debasement

States accounting for two-thirds of the global economy are either holding down their exchange rates by direct intervention or steering currencies lower in an attempt to shift problems on to somebody else, each with their own plausible justification. Nothing like this has been seen since the 1930s.

“We live in an amazing world. Everybody has big budget deficits and big easy money but somehow the world as a whole cannot fully employ itself,” said former Fed chair Paul Volcker in Chris Whalen’s new book Inflated: How Money and Debt Built the American Dream.

“It is a serious question. We are no longer talking about a single country having a big depression but the entire world.”

The US and Britain are debasing coinage to alleviate the pain of debt-busts, and to revive their export industries: China is debasing to off-load its manufacturing overcapacity on to the rest of the world, though it has a trade surplus with the US of $20bn (£12.6bn) a month.

Premier Wen Jiabao confesses that China’s ability to maintain social order depends on a suppressed currency. A 20pc revaluation would be unbearable. “I can’t imagine how many Chinese factories will go bankrupt, how many Chinese workers will lose their jobs,” he said.
Read the rest here.

3 comments: said...

I disagree. There are governments and banks that control so many tons of gold (and effectively control a larger pool). If they want the price to fall, the small time investors will get trampled in the dump on the market.

Right now the gold being worth more is worth more to them, but if inflation runs away, it won't be.

John (Ad Orientem) said...

Central banks can't flood the market with gold as easily as they once could. First a lot of them have sold off most of their gold. And secondly the central banks of emerging market nations are buying bullion directly whenever there is an attempted dump. Just last year the IMF sold off 400 tonnes of bullion. China and India bought almost all of it before it ever got out into the open market. Far from depressing the price of gold, it sent it up.

Finally there is the simple fact that there is a finite supply of gold and silver in a world where there is an almost unlimited amount of paper money. The world is drowning in paper currency.

Gold and silver have a long ways to go. We are only in the early stages of a massive world wide inflation.

John (Ad Orientem) said...

Just checked the overseas markets (Asian markets are open). Gold is up and trading above $1300.00 oz. Silver is up huge (almost 1%).