PDA

View Full Version : Gold is the final refuge against universal currency debasement



mick silver
1st October 2010, 04:38 PM
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8026324/Gold-is-the-final-refuge-against-universal-currency-debasement.html ... 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.

By Ambrose Evans-Pritchard
Published: 6:01PM BST 26 Sep 2010

368 Comments

Link to this video “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.”


Related Articles
Brazil warns of world currency war
Albemarle & Bond profits up on gold price
Capital controls eyed as global currency wars escalate
Gold could rally to $1,400
Gold breaks through $1,300 to set new record
'Gold is the best asset class to be in' 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.

Plead he might, but tempers in Washington are rising. Congress will vote next week on the Currency Reform for Fair Trade Act, intended to make it much harder for the Commerce Department to avoid imposing “remedial tariffs” on Chinese goods deemed to be receiving “benefit” from an unduly weak currency.

Japan has intervened to stop the strong yen tipping the country into a deflation death spiral, though it too has a trade surplus. There is suspicion in Tokyo that Beijing’s record purchase of Japanese debt in June, July, and August was not entirely friendly, intended to secure yuan-yen advantage and perhaps to damage Japan’s industry at a time of escalating strategic tensions in the Pacific region.

Brazil dived into the markets on Friday to weaken the real. The Swiss have been doing it for months, accumulating reserves equal to 40pc of GDP in a forlorn attempt to stem capital flight from Euroland. Like the Chinese and Japanese, they too are battling to stop the rest of the world taking away their structural surplus.

The exception is Germany, which protects its surplus ($179bn, or 5.2pc of GDP) by means of an undervalued exchange rate within EMU. The global game of pass the unemployment parcel has to end somewhere. It ends in Greece, Portugal, Spain, Ireland, parts of Eastern Europe, and will end in France and Italy too, at least until their democracies object.

It is no mystery why so many states around the world are trying to steal a march on others by debasement, or to stop debasers stealing a march on them. The three pillars of global demand at the height of the credit bubble in 2007 were – by deficits – the US ($793bn), Spain ($126bn), UK ($87bn). These have shrunk to $431bn, $75bn, and $33bn respectively as we sinners tighten our belts in the aftermath of debt bubbles.. The Brazils and Indias of the world are replacing some of this half trillion lost juice, but not all.

East Asia’s surplus states seem structurally incapable of compensating for austerity in the West, whether because of the Confucian saving ethic, or the habits of mercantilist practice, or in China’s case by the lack of a welfare net. Their export models rely on the willingness of Anglo-PIGS to bankrupt themselves.

So we have an early 1930s world where surplus states are hoarding money, instead of recycling it. A solution of sorts in the Great Depression was for each deficit country to devalue, breaking out of the trap (then enforced by the Gold Standard). This turned the deflation tables on the surplus powers – France and the US from 1929-1931 – forcing them to reflate as well (the US in 1933) or collapse (France in 1936). Contrary to myth, beggar-thy-neighbour policy was the global cure.

A variant of this may now occur. If China continues to hold down its currency, the country will import excess US liquidity, overheat, and lose wage competitiveness. This is the default cure if all else fails, and I believe it is well under way.

The latest Fed minutes are remarkable. They add a new doctrine, that a fresh monetary blitz – or QE2 – will be used to stop inflation falling much below 1.5pc. Surely the Fed has not become so reckless that it really aims to use emergency measures to create inflation, rather preventing deflation? This must be a cover-story. Ben Bernanke’s real purpose – as he aired in his November 2002 speech on deflation – is to weaken the dollar.

If so, he has succeeded. The Swiss franc smashed through parity last week as investors digested the message. But the swissie is an over-rated refuge. The franc cannot go much further without destabilizing Switzerland itself.

Gold has no such limits. It hit $1300 an ounce last week, still well shy of the $2,200-2,400 range reached in the late Medieval era of the 14th and 15th Centuries.

This is not to say that gold has any particular "intrinsic value"’. It is subject to supply and demand like everything else. It crashed after the gold discoveries of Spain’s Conquistadores in the New World, and slid further after finds in Australia and South Africa. It ultimately lost 90pc of its value – hitting rock-bottom a decade ago when central banks succumbed to fiat hubris and began to sell their bullion. Gold hit a millennium-low on the day that Gordon Brown auctioned the first tranche of Britain’s gold. It has risen five-fold since then.

We have a new world order where China and India are buying gold on every dip, where the West faces an ageing crisis, and where the sovereign states of the US, Japan, and most of Western Europe have public debt trajectories near or beyond the point of no return.

The managers of all four reserve currencies are playing fast and loose: the Fed is clipping the dollar; the Bank of England is clipping sterling; the European Central Bank is buying the bonds of EMU debtors to stave off insolvency, something it vowed never to do just months ago; and the Bank of Japan has just carried out two trillion yen of “unsterilized” intervention.

Of course, gold can go higher.

palani
1st October 2010, 04:44 PM
Of course, gold can go higher.

Gold is referred to as "portable soil". The possessor has alloidal title. Few things are left on earth that can claim this attribute.

FunnyMoney
9th October 2010, 02:32 PM
Gold is referred to as "portable soil". The possessor has alloidal title. Few things are left on earth that can claim this attribute.




I didn't know that about gold, does that attribute remain in force even if you "temporarily misplaced" it, following a recent boating accident?

palani
9th October 2010, 02:42 PM
I didn't know that about gold, does that attribute remain in force even if you "temporarily misplaced" it, following a recent boating accident?



trover will not lie for personal property in the custody of the law, nor when the title to the property can be settled only by a peculiar jurisdiction; as, for example, property taken on the high seas, and claimed as lawful prize, because in such case, the courts of admiralty have exclusive jurisdiction.

As all coins appear identical possession is nearly the only way to determine ownership. The exception is if the coins were in a particular bag and that bag could be identified (with the coin still in it).

madfranks
9th October 2010, 02:55 PM
As all coins appear identical possession is nearly the only way to determine ownership.


A very simple yet profound truth. This can either work to your benefit or detriment depending on the circumstances.

Twisted Titan
9th October 2010, 03:22 PM
As all coins appear identical possession is nearly the only way to determine ownership.


A very simple yet profound truth. This can either work to your benefit or detriment depending on the circumstances.


Best circumstances

palani
9th October 2010, 04:28 PM
As all coins appear identical possession is nearly the only way to determine ownership.


A very simple yet profound truth. This can either work to your benefit or detriment depending on the circumstances.


Best circumstances


Remember in the movie Waterworld that dry land was RUMORED to exist through most of the movie. Just because you have access to some dry land in allodium does not mean most of the world is not under water (dry land is common law (masculine) ... maritime and equity jurisdictions are feminine and colorable)... a better solution could be to develop gills and learn to live in this environment.

Ponce
9th October 2010, 07:18 PM
Gold by being the solution will become the problem......I don't how why I say this but I am sure of it.

FunnyMoney
9th October 2010, 10:27 PM
Gold by being the solution will become the problem......I don't how why I say this but I am sure of it.



You could be right and the outcome might look something like this...

http://gold-silver.us/forum/general-discussion/confiscation-of-gold-will-cause-civil-war/

mamboni
9th October 2010, 10:42 PM
Never before in all recorded history has the owning of physical gold and silver been more imperative if one's intent is to preserve his wealth and survive financially. In blunt terms, owning physical gold and silver is an utter no brainer. The corollary to this is that those who do not own physical gold and silver have no brains, or are economics zombies. They are as good as dead from the neck up not to see that the world financial system is crumbling, turning to dust. All paper money promises will be broken or severely discounted. Gold is soveriegn - it cannot be discounted by man.

Libertarian_Guard
10th October 2010, 02:10 PM
The corollary to this is that those who do not own physical gold and silver have no brains, or are economics zombies. They are as good as dead from the neck up not to see that the world financial system is crumbling, turning to dust.


That would account for atleast 90% of the US Population.
I'll agree with you about Mamboni's statement including at least 90% of the U.S. - - but I think the real number is something closer to 99.5%!