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Politics : Dutch Central Bank Sale Announcement Imminent?
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To: sea_urchin who wrote (17706)4/4/2003 2:06:51 PM
From: mcg404  Read Replies (3) of 81091
 
Searle: Contrary Investor ran a column yesterday on gold. It's a pay site so I'll summarize.

Linkage between a valuation benchmark such as gold and paper currencies has been severed in modern financial/economic era. When countries have developed financial/economic imbalances, global capital markets have served to correct them (eg, asian economies in 1997). Things have changed in the USA, which is also the country with the reserve benchmark - USA is now the largest debtor nation and running large trade and current account deficit balances. Global capital markets are between a rock and a hard place in correcting this imbalance since they stand to suffer if they impose discipline. How far can these imbalances grow before global capital seeks a benchmark that is an alternative to paper? If the current benchmark (the USD) becomes tarnished, where does global capital go? Other paper? If they tires of chasing other financial benchmarks, does it decide to benchmark against physical commodities? The only investment basis for gold is as "insurance against the ability of current global economy and financial system to correct what are very significant imbalances without some type of financial disruption. The disruption specifically being currency related...the historically recent decade acceleration in the proliferation of paper promises throughout the global economy cannot continue indefinitely without a crises in benchmark valuation confidence at some point."

I'm not really trying to argue a point. Only passing on what I found to be interesting observations. As I continue to contemplate pulling the plug on my gold investments...

John
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