Scott,
<<All: John Dessauer, in his April 1998 "Investor's World" newsletter, entitled a
section "Bigger Problems Ahead for Gold". >>
I think he in incorrect because:
First - any selling the Swiss do, must get the approval of the general populace - I do not think they will get it. Mostly because of history and but also _if the EU has large gold reserves, there will be a tendency (in my mind) for other countries to hold onto and increase their reserves. I believe the ONLY way the EU's currency will be taken
seriously is if they hold a large gold reserve AND a large US dollar reserve (forleverage). The Europeans are still really pissed at the US for their dumping on the Bretton-Woods agreement .... they have not forgiven Nixon for crapping on gold in '71. That gave the US the opportunityto print paper until their heart's content ...
something the Europeans have never forgiven the US for in my mind. In addition the US Treasury in concert with the IMF altered its articles in 1978 to suspend gold as the ultimate means of settlement ... according to Timothy Green, in his book "The World of
Gold" this essentially "froze" the gold in European banks as a fluid means of settlement. Most attempts to have gold return to its previous position, have been met with some sort of US intervention - which ultimately lead to the US dollar remaining as currency numero uno. There is no doubt that over the last 50 years the US has just about done everything in its power to demonitize gold - to the benefit of the US and to a large extent to detriment of everybody else.
Second - even if there is a surplus of gold, I suspect that most of it will be sold to other CB's.
Third, a fall to that level would shut down 99% of the world's gold producers ... that would eventually lead to an elastic band effect that would eventually propel gold to the moon ... I do not think most paper-bound economists want to see that happen.
Fourth, I believe the Japanese, with their large US reserves, will sell some off some and replace with Euros. I do not know how much, but I think they will also buy gold too.
Essentially what we have unfolding before us now, on a global scale, is a contest between 3 currencies ... the dollar, the Euro and the Yen. The Yen and Euro by themselves are not strong enough to displace the dollar - but a concerted attack by the Japanese and the Europeans on the dollar ... that is a different ball of wax. When we
had a cold war ... we needed a "balance of power" .... well, we still do - only this time it is an economic balance of power.
Some of my thoughts,
MB |
