Friday :: Nov 26, 2004

All That Glitters

by pessimist

It has become a standard, if you will, that when economic times get tough, the tough buy gold. That doesn't seem to be the case any longer.

Gold is on a tear, but where are investors?

Gold prices have been pushed up by the dramatic fall in the dollar. Investors often view gold as a currency of last resort, a commodity that retains its worth even when paper money falls in value. The dollar hit a new low against the euro Wednesday, trading at $1.32 per euro.

But investors have been more interested in buying foreign currencies than gold. International income funds, which invest in foreign bonds, have raked in an estimated $2.4 billion this year.

I find this change in investor behavior most interesting.

We have all heard the rants of those who wish to return to tying the value of the dollar to a fixed amount of gold as had been the policy up until the Nixon Administration. These rants are intended to restore a system which removed the uncertainty that an ever-fluctuating dollar value represents. it also makes it much easier to play the foreign currency markets, and many a fortune was created doing just that. But the fixed-dollar game was a rigged game, as one side would always remain constant while everyone else floated all around it.

That is no longer the case. So why is there is no special advantage in holding gold? This is what interests me.

One disadvantage is the law. US regulations concerning gold make it awkward to convert, as most investor transactions are going to hit the $10,000 trigger that alerts the feds to large-scale financial activity. Somehow, I suspect that such illumination isn't too welcome in that world, or we'd see more openness.

Also, there are the practical considerations of storage and security, much less transportation. Each of these constitutes a fairly hefty sum as the quantity grows, and overhead is one of the more popular line items to trim by the execs these days.

Then, there is the plodding slowness of the transaction. I don't own gold, but I would suspect that unless the gold were in the form of a national coin like the Krugerrand or the Maple Leaf, verification and provenance would take up enough time to pass a liberal law in today's radical conservative Congress.

It may just be that investors no longer feel that gold's disavantages are outweighed (pun intended) by it's stability. Time is money, and fortunes change hands in the time it takes to send an instant message to your banker to sell your gold stock.

Why am I going on about this?

I, among many others, have been noting that the dollar isn't carrying the cachet it once did, and for reasons that aren't necessarily monetary in nature. International diplomatic displeasure with the Crawford Kid and his cutthroat oil rustlers has as much to do with this as the federal deficit does. One could think of this in terms of voting with one's capital, supporting the non-US options at US expense. Gold knows no national identity, but the Euro and the Renminbi and the Rupee do. Investing in these currencies is a vote of confidence that these economies are the safer bet over the Bu$hCo hollow dollar.

Such a feeling weakens not just the value of the dollar but our entire nation. Just looking at this in terms of Bu$hCo military adventures should be illustrative. Much of the armaments that our troops use are not made in the US. Thus, they have to be purchased from another nation using its currency for the valuation. As the dollar sinks, how much more does it cost to fill that 30-round M-16 magazine? How much more do we have to pay Silvio Berlesconi's Italian Beretta connection to replace any lost or damaged side arms?

It's bad enough that the United States isn't the manufacturing nation it once was, but now we have even outsourced the means of our own defense, much less the tools of offensive invasions of sovereign nations.

Like a drunken cowboy on a spree after a long cattle drive, Bu$hCo is going through its cash - and ours. Remember? "It's YOUR money!" People whose life is money and its transactions certainly know this, and their actions should be an indication to us that something is amiss. And we would know this, if we weren't so distracted by Desperate Housewives.

There will be a reckoning, and it won't be Divine in nature. It will be economic, and it seems that Bu$hCo can't wait for that to happen. It has to be part of the plan to bring on the Fourth Reich through the mechanism of massive inflation due to economic mismanagement, for then the people will clamor for a strong leader to repair the damage 'those foreign bankers' have wrought upon the American Prosperity.

Hey, it worked in Weimar! Why shouldn't it work at Wal-Mart?

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pessimist :: 1:11 AM :: Comments (1) :: Digg It!