Gold: Past, Present, and Future
in Other Investment Types ·
Paul Peterson4 said:There’s a pretty interesting angle to this whole Dollar vs Euro debate: it really comes down to who's going to blink first. The US is running this massive trade deficit, whereas the EU is a bit of a mixed bag—you've got Northern Europe exporting everything while Mediterranean countries import most of their stuff. But overall, the EU manages to cover its own demand for goods and materials through domestic production, while the US is basically stuck depending on Chinese people and others to supply them with goods in exchange for those greenbacks.
All the major currencies right now—Dollar, Euro, Pound, Renminbi, you name it—are essentially being "printed." Or, more accurately, we're seeing massive amounts of money being digitally generated without any real backing (well, if you count newly issued government bonds as backing). It feels like we're drifting toward that Nostradamus idea of funding a state budget through primary issuance—except, obviously, there are banks in the middle taking their cut, often state-run ones at that. Unless some miracle happens and the economy just takes off, it's a safe bet that cranking out new money will lead to inflation. I'm not talking about that crazy, hyperinflationary mess you saw in America, but we're looking at maybe 5%, 10%, or even 15% annual inflation—though they'll probably try to hide the true scale using some shady statistical gymnastics early on.
For now, I’m sticking with the Euro since my expenses are in Euros, and honestly, I find it more stable than the Dollar. If the Arabs & CO start selling oil for something other than USD—and hey, the Iranians are already doing it—then the US printing press won't be able to tax the entire world anymore. That would trigger even bigger trade issues because, frankly, the US won't have much left to pay for imports. They'll be forced to bring manufacturing back to the States, which is going to be an expensive, long-term headache. As it stands, the Fed is basically the biggest buyer of T-bills. Once the Chinese stop buying them, pretty much everyone else might follow suit.
The pension fund situation is also worth watching. Traditionally, one of the largest institutional investors stays well away from PM. Lately, though, they've been taking heavy hits on government bonds—which are supposed to be the "safe" bet, assuming you follow the legal mandates on where that capital can go. If they even direct a tiny fraction of their capital toward PM, it could send the price skyrocketing. Right now, they're struggling to find decent places to park money; between playing poker with the Greeks and worrying about the Spanish, they're facing actual negative interest rates from the Germans. At this rate, they'll be handing out starvation pensions.
You sure about that?