[quote]JEATON wrote:
Dr. Pangloss wrote:
Currencies are driven by interest rates; specifically, they’re driven by interest rate differentials. Once US short-term rates start moving up vis-a-vis other currencies, you’ll start to see the dollar appreciate. You may also see the dollar advance due to European-regional issues (witness todays %1.4 move in the dollar due to concern over Dubai). Either way, there’s no official “reserve status” hat that the dollar wears - or has ever worn - it simply is the currency that most of the world chooses to hold. That being said, there is no better single currency. A very good case could be made for a central bank to hold currencies in equal weighting to their foreign trade, and that alone accounted for a large percentage of the weakness in the dollar/Euro during the early part of this decade.
Points well made.
I have been watching the DXY closely for the last few months. I like the look of this little move off of 74.21. Most of the worlds attention has been on us (U.S.) for the last year. By this, I mean all of the negatives that have occurred. It was a chance for the rest of the world to pat themselves on the back and say, “Look at the high and mighty U.S. Look how they have fallen.” With their new found self esteem, they have neglected to take a look in the mirror. Yes, it is bad here. But it is no better elsewhere. I am concerned that maybe Dubai is just a prelude.
We are the economic engine of the world. When we catch the flu, it spreads. I have the bad feeling that China is not as sound as we been lead to believe. I am reminded of the cold war and the opinion that the rest of the world had about Russia and its position as a military power. In the end we discovered that they were conducting parades with what amounted to card board cut outs of missiles and weaponry. I am not saying that China is this bad. I do have my doubts though.
I also have my doubts about gold at these levels. Again, it reminds me of oil about a year and a half ago. It was going to $300-$400, no question. And then…
Today, everyone is talking about how gold is going to $2000-$5000 an ounce. People with no investing knowledge at all are asking me how do they buy gold. Even John S, who I admire for his thirst for knowledge and his enthusiasm, is talking about restructuring his student loans in order to by gold and silver. I consider John to be very intelligent, but this kind of behavior screams to me that the top is very near.
Let me give you a scenario that you can laugh at if you choose. Everyone talks of gold as being the only true money. I get it, but only to a point. If you are using it as an investment vehicle, or a hedge and are diversified, go for it. But if you are buying gold coin and such to use as real currency in the event of an economic meltdown then think it through very carefully. This is not the middle ages. Commerce is not set up to run on gold. If things got so bad that paper money was worthless, who is going to take your gold? The government would have already seized it by this point and made its possession illegal. And even assuming they did not, what would you do with it. If things were that bad, most trade would be reduced to the barter system on the local level. You can’t eat gold. My family is hungry and you offer me either a gold coin or a chicken, I’m taking the chicken.
I am not the smartest man in the world, this forum, and maybe even the room I am setting in now. I am just suggesting that folks think things through from multiple perspectives before they hitch their boxcar to any particular train. [/quote]
If there is a total breakdown of the economy no form of money will help you.
However, if there is a money economy left, gold will probably be onr of the moneys.
So I do not really see how you make a case against gold.
