Currency Wars and Gold

Posted | 10/11/2014 / Views | 2478
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Central banks are desperately printing  money and implementing zero interest rate policies everywhere trying to stimulate their economies and debase their currencies to make their exports more competitive.  The Euro just hit a 2 year low and the Yen keeps on diving as BoJ ramp up their stimulus program to frightening levels.  The US just finished their record breaking QE program (for now) and are already feeling the effects of a higher USD.  The following 2 quotes are salient reminders for investors…

Speaking at the Council of Foreign Relations – ex US Fed chief Alan Greenspan has this to say when asked “Do you think that gold is currently a good investment?”

“Yes... Remember what we're looking at. Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it.”

and Mike Savage delivered this last week:

“I fail to see any difference between what the Japanese are doing to their currency and what Weimar Germany did to their currency in the 1920s. It was at that time that the Mark traded from 4 marks to the dollar to over a trillion marks for a dollar just a few years later. People used wheelbarrows to carry the cash to get a loaf of bread. Thankfully, we have credit cards and ApplePay today so they won't need wheelbarrows- just a lot of zeros to count!   

This phenomenon, which happened in Germany, did not happen all at once. There were signs, many like we are seeing today. Then, all at once- bang! It hit critical mass and could not be stopped until the currency was destroyed. Anyone who thinks these central banks have this under control- think again. It was the German central bank that caused the Weimar hyperinflation. This episode is the main reason that the Bundesbank (German Central Bank) will not allow European QE, at least so far.

It is the Japanese Central bank that appears hell bent on decreasing the value of the Yen. They should be careful what they wish for.

 

Wealthy people around the world have already started to divest of paper assets. They are trading paper for fine art, automobiles, real estate, enduring businesses, and metals.

In the meantime, oil and commodities are selling off which seems to indicate that economic activity is slowing and appears to have no end in sight for that trend. So as the stock market continues its rise to new heights the underlying economy is becoming more and more anaemic. This should not be any surprise as all of this new debt that is being created to pay off new debt and interest on previously issued debt is exactly what is choking off lending for productive use- like infrastructure, new companies and jobs.

It is too bad that most people are brainwashed by the propaganda on mainstream TV and think that all of this is normal. It is not!  The one thing that is different this time is that in the past there would be a country or two that would debase their currency and pay the price. Today, the whole world is in on it. I am not looking forward to when this comes to a head!

While many may look at this as gloom and doom I look at this as reality. I also look at it as an opportunity. It will only be an opportunity if you have a plan to take advantage of it.”