Long standing readers (surely “long suffering”?-ed) will recall our two blogs Gold is King….(LSS 26 10 24) and ….Did we actually get something right?(LSS 23 4 25).Which severally predicted that a deteriorating security situation in general, and the policies of the Trump Administration in particular, would have two consequences. First that the dollar would start to lose reserve status. And that in the absence of any credible alternative, Gold would become the only reliable safe haven, and that its price had la way to rise. Now help has arrived from someone who really knows what they are talking about, the astute Richard Partington of the Guardian. Have a look at this killer quote from his succinct article The Dollar is losing Credibility: why Central Banks are scrambling for Gold: [1]
Investors – private and sovereign – believe their strategic reserves are no longer safe in dollar terms, as they can be confiscated overnight. The dollar is losing the credibility as the nominal anchor of the global monetary system because the Fed is losing credibility, and US Congress is losing its credibility.
And he explains how and why all the most astute and powerful people in the world can see nothing but gold as the only safe place in which to park their assets in the foreseeable future.
At the risk of blowing our own trumpet,(oh, come on!-ed) and in the sure and secure knowledge that we never offer financial advice, only economic commentary, and that wistful, we wish to adduce the following points:
1 Is LSS possessed of an eeerie mystic prescience? No. Even a stopped clock is right twice a day. But when real professionals like Partington confirm our thoughts, it means the facts are pretty grim indeed.
2 Isn’t this a lot of log rolling by the Guardian, which has a bit of a reputation for being a Lefty at times? No-all commentators are starting to agree, including a pretty astute lot at the Financial Times. And if you believe they are Lefties, then you might as well believe in a Flat Moon and the Abominable Yeti.
3 Is the dollar finished as the world’s reserve currency? Not yet. But its fall from 66% of global reserves to 57% in a single decade suggests all is not as healthy as it once was and that alone gives cause for concern.
4 So why has another currency not replaced the dollar? The experts we consulted think that Europe is too weak for the Euro to be a runner. While China’s yuan is just not convertible, and its political system is so different, that they rule it out altogether
5 What about all these ‘ere funny digital currencies, wotsit? We don’t even go there, we know nothing about them.
6 Is this more Trump-bashing? No. We think Mr Trump has a right to act in what he believes is America’s interests. We merely report the consequences of what happens when everybody acts like that.
7 Does LSS like what’s happening? No. we hate it. A world in which the principle economic activity becomes digging a metal out of the ground and then burying underground again somewhere else is operating far, far below its optimal economic potential. It would do much better with a single reserve currency, peaceful trade and stable international relations based on Law. But some of you will have found our thoughts on that matter elsewhere in our sequence of blogs.
#dollar #gold #economics #trade #currencies #international relations
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