Bobby: Guess I'm stuck in a rut re: gold. Japanese unfunded pension liabilities are very strong argument against any discipline such as gold. Banks realize they must foster strong world consumption to help companies with underfunded pensions earn sufficient monies to rectify pensions. Discipline of gold would slow world growth, etc.
Would Japanese people repudiate the Yen to hold gold? Remember their dedication to country - I doubt they would, en masse, scuttle the currency and country by buying gold, knowing they would be slitting their own economic throats in so doing.
Bobby, read Greenspan circa 1980-1982. He said gold won't serve as reserve currency; that it must be killed to restore faith in the USD; that this could be done by trading US Treasury gold to depress gold's volatility (profit potential) to nil. "They" are doing exactly as said so gold does not provide a reasonable Reward/Risk ratio. Its dead. The last thing CBs would tolerate is resumption of trust in gold at cost of loss of faith in USD.
There was a time around 1980 when US corporate under-funding of pensions was a hot issue, but not a monster like Japan. I'd guess that government economists and Fed economists did factor this into government full employment policy and Fed policy, knowing the repercussions that loss of faith in pensions could have. US persons tend to save only about 2% of gross family income over and above pensions. Japanese save 15%. If US workers opted to save 15% a severe recession would result with interest rates plummeting afterward due to a) low demand for lendable funds, and, b) massive net free (un-borrowed) reserves arising from accumulation of savings.
Banks abhor a gross unbalance resulting in huge net free reserves, low loan originations and low interest rates. Kills earnings, bonuses and options performance.
Everything argues for a strong, concerted effort to get Asian consumption growing strongly to generate wealth to service debt, including pensions. Alternative is the big D and then who will have money to sustain gold rally?
Don't fight the boys who can print money - they are more powerful than you and I.
RH |
