TJ
My coin collection is dancing, how about yours?
Seriously, if US M3 at 10 trl is 1/4 global developed M3s, then 40trl/5bn oz is $8000, an interesting number since it is almost 10x the prio $850 peak for gold.
Except that US M3 is growing, at 1trl every 18mos.
So, assuming a short gold bull of 36mos duration (could be many years longer), we should add 2trl, or 12trl for US M3.
Could global M3 in 3yrs be 48trl?
Then $9600/oz.
As gold has grown 14% this year against CAN$, one of the strongest currencies, and BOC has 10yr bonds yielding 4%, then the best paper money is losing value at 10% p.a.
We know that gold has lost 50% under Bush's 5yrs
So, will global CBs have to raise interest rates to be able to continue to issue bonds? I wager they will ultimately decide to protect their banking systems (forget about idealist objectives like full employment), but in a Catch-22, the higher rates derails the housing market and weakens the banks.
So, the US will raise rates and Ben will shower money on US households. He may need every Sikorsky on the planet to do so, but that is the temporary way out for the US.
The question I have is whether commodity currencies like the Kroner, Loonie and Aussie will ultimately be forced to raise rates as well in a global liquidity crisis, or will they survive on their commodity exports?
For the Yen to be at 121, as Coxe points out, something strange is going on. Either the Japanese are really giving up on their currency or the Chinese are no longer pulling their weight to support USD and Japan has to sell all the Yen it can to buy dollars. Their easy money policy might have to end very soon now, for Japan needs to staunch the flow out of the Yen. It seems at dangerous levels, having lost over 15% this years. Hmmm, the same as gold appreciated against the Loonie.
Cheers, D |
