Phil > I think increasingly there is an awareness of the awful state of the US economy, the world economy, and gold is benefiting
Yes and no. Yes, because the world economy is in definitely bad shape and no, because gold doesn't benefit the world economy, only the "idea" of gold may benefit some gold speculators.
As you say, I'm not big on gold because I think it's had it's run for the time being. I may be wrong, as I usually am, but that's my opinion.
> The global debt is astounding and exploding,
I'm not sure about global debt. The debt that's out of control is American debt --- and that debt supports the ponzi scheme which is the world economy. Either you take the paper or you don't. If you take the paper (the USD) that means you sell your goods and employ your people. Gold does not enter into this equation. It does nothing for the debt and does not provide jobs. It is simply something for a certain few people to gamble with as they speculate about doomsday.
> the FED has made no secret that they are willing and prepared to keep priming the pump, (print more money) to get the economy moving
Absolutely. And it is the debt which "backs" the money. Without debt there is no money. And it is money which makes the wheels of the world economy turn. Money is a medium of transaction, not a store of value.
Accordingly, whatever one feels will appreciate, and for whatever reason, is worth holding. That, of course, depends on the skill and luck of the speculator, not anything intrinsic to the asset, because everything is overvalued and in surplus today, IMO.
> Personally, I am positive short term and long term on the POG.
In the immediate short-term you may be right, with the current devaluation of the USD against the Euro. But, how far up do you think the Euro can go? The European economies are virtually in recession and exports have now gone to hell. Likewise the Japanese economy. Long term, I have my doubts because devaluation of the USD will not be of benefit the US economy (it will not aid US exports because most US production is now offshore and it will make imports more expensive). It may however create perceptions of inflation (anti-deflation), which could drive up prices.
As I have mentioned previously, unlike the opinions of many who are far brighter than I am, I do not see that present USD devaluation will balance any economic imbalances but will make them worse. IMO, the structure of the world economy has, in fact, now been "cast in stone" with the US being primarily an importing and a borrowing country and the rest of the world being primarily exporting and lending nations.
In SA, we have a similar problem to the US but in reverse. SA is an exporting country, particularly of primary produce -- minerals, agriculture etc. To facilitate exports, the currency has been in a state of continuous devaluation. This has led to high inflation and this, in turn, to more devaluation. Recently, as you probably know, the currency (on a rebound) has appreciated by about 50%. Government spokesmen have all been raving about the "strong" currency and how inflation will be now beaten. The net result, however, is that one company after another have announced drastic falls in profits which, in some instances, have led to retrenchments. The point I'm trying to make is that it is absolutely crazy for anyone to attempt to turn the SA economy around from primarily an exporting country with a cheap currency to an importing country with a strong currency. Meanwhile, because of the strong currency in SA, or the perception thereof, gold is a lousy investment. This chart of the SA gold share index will show you what I mean.
www2.sharenet.co.za
Similar to the SA economy, and most world economies today, I maintain the US economy is also "fixed". Thus there can be no balance, no equilibrium. Eventually, according to this scenario, when the US can't service its debt it will have to renegue --- compromise with its creditors --- and the game will start all over. Frankly, I don't see any alternative. The die has been cast.
Here's a piece which someone sent me the other day which I thought was very interesting.
financeasia.com |
