Paper currencies never last very long, but the value of certified gold has endured for centuries.
Posted by Adam King on February 25, 2011
Gold is forever, but currency grows on trees.
February 25, 2011 – Paper currencies never last very long, but the value of certified gold has endured for centuries. The problem is that unlike money, governments can generate currency at will, and they always do.
In Douglas Adams’ Hitchhikers’ Guide to The Galaxy trilogy a band of society’s most non- productive citizens – hair dressers, telephone sanitizers, accountants and such – are dispatched on a one-way voyage across the galaxy to colonize Earth. Seeing the vast forests here they are struck by an idea to make them all unbelievably wealthy – they make leaves their currency. That is absurd, of course, but our Fed also seems to believe that money grows on trees.
The more currency Bernanke prints the less it is worth, plain and simple. After less than a century the dollar is now worth only a nickel. It might not become worthless, but it can get mighty close mighty quick.
It seems strange, then, that while the stock market just took its biggest hit since last summer, the dollar rose along with the gold market. That is what traditionally happens when investors see escalating risk in traditional assets, but it defies logic when the dollar is very risky as well.
There is a growing sentiment along those lines, however, as witnessed by strong interest in the Swiss franc and a nosedive in treasury yields. But gold remains inexplicably anathema to big investors, who are buying gold only to hedge their currency assets.
Using Shadowstat.com’s much more realistic and reliable inflation figures, gold has a lot of room to grow – a good 500% – before it tops out at its long-term trend. And the dollar’s demise as the global reserve currency is sure to push the ceiling even higher.
While big money continues holding back individuals have a very rare opportunity to cash in big with gold investments.
Stewart Lawson
Senior Staff Writer – Certified Gold Exchange
Categories:
US Gold Market
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