For the week commencing September 29th, there are some key economic data and the European Central Bank announcement that could impact markets and precious metals. A key event this week is undoubtedly the ECB rate decision on Thursday October 2nd.
Tag: currency devaluation
With credit markets in Europe and the US taking a bit of a pause for profit-taking or reassessment, it is notable that currencies have not. The euro finally broke free of what looked like a steady range, though unfortunately to the downside. While that may be celebrated by orthodox economists in Brussels and elsewhere, it should not as such devaluation has led to no place good in the recent past. Curiously, however, the ultimate indicator of such risk, gold, has remained in its rut while these other pieces notoriously shed such contented framing.
While the major central banks continue to flood the global financial markets with their fiat currencies and as geopolitical tensions around the world look set to increase, the price of gold is likely to rise.
People should not think that the role of gold is only to move from one central bank to another (say from the US to the Chinese). That is gold’s use for currencies by the central bankers. YOUR use of gold is to preserve the purchasing power of yourself and your family through a variety of circumstances in some mechanism other than fiat currency.
The interesting part for us, gold enthusiasts, is the price of gold in the slaughtered currencies. Gold in Argentine’s Peso is up 30% in the last 30 days; it is trading at all time highs.
Gold in Turkish Lira’s is up 17% in the last 30 days; it is trading just 10% below its all time highs of September 2011.
One of the consequences of Japan’s currency debasement is now starting to show its ugly head: the cheaper Yen may be intended to stimulate exports but it simultaneously makes imports more expensive.
The ZIRP and QE are causing the retirement funds for many governments and corporations to be more underfunded each year. If your retirement comes from a government pension, it is less secure each year. It can’t remain underfunded forever. Corporate pension systems invest similarly. If your retirement comes from a corporate pension, it is less secure each year.
Politicians and bankers work together to benefit themselves at the expense of the people actually producing something of value. Politicians increase their power and influence by spending ever-increasing amounts of paper currencies. The bankers enable the process by creating paper currencies (from nothing), loaning out this money. This process succeeds until the debts must be paid.
Argentina is a prime example of currency depreciation and capital controls. Casey Research reported this week how Argentines are doing everything they can to circumvent a new dollar clamp which is imposed by the Uruguayan government. They take risks traveling to Uruguay to extract US dollars from their peso-based Argentine credit cards.
The Wall Street Journal recently published two separate articles discussing the bull and bear arguments for gold. The elephant in the room remains unexposed. Today’s world is dominated by neverseen liquidity, monetary easing, and financial repression. The EFFECT of these measures (i.e. currency devaluations) are simply negated in the bull vs bear arguments. It is the single biggest threat to the 99% of the people which seems to remain unexposed.
Currency devaluations travel around the world, in cycles, and they are reflected in the gold price in the affected currency. The dollar remains fairly strong because every time there is a panic it goes with a flight to quality. The dollar maintains its value, so will keep on printing, until very suddenly and unexpectedly, there will be a loss of trust in the dollar.
The world currency system is riding down the road to catastrophe. Those were the words from James Rickards during a recent interview on Wall Street Journal. The world already has entered a currency war that began in 2010 on the heels of the Federal Reserve’s massive easing program. Since then, plenty of nations have joined in, including Brazil, Switzerland and Japan.
An excellent overview was published by GoldSilver.com showing the 2012 performance of almost all currencies in the world against gold. In a detailed article, 164 fiat currencies were analyzed against the precious metals. Big surprise, 94% of all fiat currencies lost purchasing power to gold. The rare currencies that did not lose value compared to gold, did so with a minor percentage difference.
Gold serves numerous functions as an investment. Traditional reasons for investing in gold include: Inflation Investment market declines Burgeoning national debt Currency failure War or other extreme events Social unrest Some would argue these entire phenomenon are related. For instance investment market declines can lead to war which can be followed by inflation which can lead to currency failure – just look to Germany in the 1920s for proof of this (albeit in a mixed order of events). Basically, gold is protection against various ugly or undesirable societal, political, economic and financial occurrences. That reasoning broadly explains gold’s rise from $650 in 2007 to approximately $1800 today. Gold has risen […]