woensdag 9 september 2009

New Panic Signals?


There is a sort of down spiralling, 'we are not there yet', doom scenario spirit going on in the periphery of the financial world that has bothered me a lot lately. For example: Precious metals hoarding is supposed to be skyrocketing, where today (090909) I only see precious metals (or to be more correct: the value of precious metals measured in US Dollars!!!) depreciate in value. What I DO see is nothing more than could be expected, i.e. a slow but steady downfall of the US Dollar (1.45 US$ = 1 € as measured today. A week ago this was 1.41 US$ = 1€, so the US$ is losing ground).

A year ago (about) I predicted a US$ fall to 3 US$ = 1€. Ridiculous right? Well, we're nearly halfway there, but do not despair and keep remembering 'I told you so'.

As the US$ depreciates, the price of gold will rise, as will the price of oil and all other -traditionally- $-denominated commodities. To then conclude that 'everybody' flees into (precious) metals or into other simply marketable commodities is -IMHO- a too hasty conclusion. There is not enough gold to hide in anyway and investors will be the wiser to remember that while 'fleeing'.

I do not claim to be the world's foremost predictor, I only try to reason out my thoughts:
  • fact is that the US$ is overvalued given its nearly immeasurable debt,
  • fact is that China is more and more hesitant in financing US debt,
  • fact is that US mass production industry is nearly bankrupt,
  • fact is that older US citizens need to be employed. There pensions have evaporated,
  • fact is that the US financial system is still very unstable,
  • fact is that US debt is (still) steadily rising and wars are still fought,
  • fact is that not one of the items above applies to Asia and/or for Europe.
So,
The US$ depreciates and I honestly think the IMF has to raise its voice and has to restrict the US economic policies as they did for all other countries that got entangled in similar positions.
Obama will not like this, not with all his reforms to be introduced this fall season. He will need a lot of persuasion capabilities, nationally as well as inter- and supra-nationally.

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