Back in the 1980s I thought that the dollar might decline, and I bought gold and gold mining stocks, hoping to profit from this.
After about fifteen years of getting nowhere, it occurred to me to ask, "If the dollar declines, what is it declining against?" The answer is, "Against other currencies."
Now I ask myself again, "If the dollar is overvalued, what is it overvalued against?" And the answer is again, "other currencies."
Now what are "other currrencies measured against?" Well, ultimately, the goods and services that they can command. Not necessarily gold.
If the ECU countries maintain greater financial discipline than the US, the euro will give its owners a more credible claim on goods and services than the dollar will. One of these "goods" is gold itself.
If, however, we see the ECU countries lowering interest rates and allowing their money supply to balloon as the US has, the only store of value may be material things, including gold.I think that energy sources are better than gold because they are really useful, and because they are consumed.
I used to be a believer in silver, but the success of digital imaging is much greater than I imagined and I think silver-emulsion films, the greatest use of silver, are on their way out. Much of that silver is recycled anyway.
What I say about currencies and gold reflects, or perhaps parallels, the thinking of Paul Kasriel, often quoted on the former thread.
I don't say gold is BAD, but I think that if you think the dollar is going down, you get into what it is going down against: other, better-managed, currencies. |
