Perspectives on the global economic changes

TSJones · Post by **TSJones** » 09 Sep 2015 20:10

And i might point out, the problems China is experiencing is partially related to skewing of demand by pursing export political policies and economic incentives(monetary management pegging). and then trying to put it on a straight line graph of economic performance promises to their citizens.

Singha · Post by **Singha** » 10 Sep 2015 07:09

and the expensive Rio olympics is next year and commodities demand is slumping:

Standard & Poor's downgraded Brazil's credit rating to junk grade on Wednesday, further hampering President Dilma Rousseff's efforts to regain investors' trust and pull Latin America's largest economy out of recession.

The faster-than-anticipated downgrade from investment grade will likely rock Brazilian financial markets on Thursday and will increase borrowing costs for the government and Brazilian companies.

Brazil first won its investment-grade credit rating in 2008 and the S&P downgrade is a major setback for Rousseff, a leftist struggling to kick-start the economy and shore up weak public finances.

It further sours market sentiment about the country and Brazilian assets will suffer because many investors are not allowed to buy or hold onto investments that are not rated investment grade.

panduranghari · Post by **panduranghari** » 10 Sep 2015 14:59

TSJones wrote:
fuel is certainly lower in the US because unlike Europe we don't tax the hell out of it

The world certainly revolves around America for some. Alas this western universalism is not something I respect nor admire. Do you believe USa is exempt from the laws of thermodynamics. I know the USa changes laws as it sees fit. But the nature cannot be altered.

Thats all besides the point. I made an observation that asset price deflation is different from price deflation. There is a mistaken belief that the world needs the dollar. No it does not. The world needs the functions that dollar undertakes. And once this understanding is clear, then you can see why many nations are letting their currency float. The dirty peg is not being supported. The recent shenannigans in China are also to do with th elimination of the dirty peg. The ofshore RMH and onshore RMB are being brought togther thus eliminating the need to keep the dirty peg active.

TSJones · Post by **TSJones** » 10 Sep 2015 16:16

Is any food getting cheaper? I dont see it. NOTHING is getting cheaper.

historical price of fuel in Britain and a graph of taxes there of:

submitted for your perusal and edification.

http://www.petrolprices.com/the-price-of-fuel.html

panduranghari · Post by **panduranghari** » 10 Sep 2015 16:31

India Precious Metals Import Explosive – August Gold 126t, Silver 1,400t

https://live-bullioninternati.netdna-ss ... Import.png

https://live-bullioninternati.netdna-ss ... Import.png

images too big.

Altair · Post by **Altair** » 10 Sep 2015 16:32

There are few things which got cheaper and I see why people can get confused with terms like Deflation. There is lot of manipulation going on in the markets. The Crude price is manipulated. The Gold price is manipulated. Yes, Gold price is too manipulated. There is no reason in the world that Gold hovers at 1106 when we have a meltdown everywhere. Gold should be atleast at 1300 or 1600 by now. We are sheep being led by wolves. Slow march to slaughter house! maaaaeee maeeee..

TSJones · Post by **TSJones** » 10 Sep 2015 16:42

If you are trying to say the price of goods and services have not dropped because the value of gold or oil has precipitously dropped then you are trying to compare apples to oranges and its just not going to make sense.

gold and oil are valuable commodities but they are not money. they can be traded for money and indeed that is exactly what you did when you bought them. you gave your money and got gold and fuel in return. it is incongruent to then turn around proclaim the price of food or fuel has not dropped in relation to gold or any other commodity for that matter. you are switching yardsticks after you have used one yardstick(money) to purchase gold in the first place. it is not logical to do that.

no one ever told anybody that the price of gold or oil must retain its value in relation to currency. that is a risk you must assume. especially when a country like China skewed the price of commodities upward in speculation that their economy would grow in a straight line fashion by a future date.

that is highly risky behavior.

srin · Post by **srin** » 10 Sep 2015 17:06

Altair wrote:There are few things which got cheaper and I see why people can get confused with terms like Deflation. There is lot of manipulation going on in the markets. The Crude price is manipulated. The Gold price is manipulated. Yes, Gold price is too manipulated. There is no reason in the world that Gold hovers at 1106 when we have a meltdown everywhere. Gold should be atleast at 1300 or 1600 by now. We are sheep being led by wolves. Slow march to slaughter house! maaaaeee maeeee..

We know crude price has been manipulated by OPEC, but atleast there is an intrinsic utility to it.
Gold is sort of special - there is no basis to attach any fair value to gold. Gold has a value because everybody attaches it a value. How would you say 1300 or 1600 is the right price for that value ?

Altair · Post by **Altair** » 10 Sep 2015 17:15

Scenario-1
I exchanged 1600$ 2 years back to get 1 oz of Gold.
I exchange my 1 oz of Gold today and get 1110$ back in cash.

Scenario-2
I bought 10 pounds of wheat at Walmart for 7.5 $ in 2013
I bought 10 pounds of wheat at same Walmart for 8 $ in 2015

Assumption-1
Gold value is constant
Does it mean => $ has actually increased its value.?

Assumption-2
$ value kept constant
Does it mean => Gold lost its value, It became cheaper for various reasons?

What actually is happening is manipulation by Central Banks of both $ and Commodities before inevitable Hyper Inflation. Nothing is getting cheaper.

Altair · Post by **Altair** » 10 Sep 2015 17:20

srin wrote: We know crude price has been manipulated by OPEC, but atleast there is an intrinsic utility to it.
Gold is sort of special - there is no basis to attach any fair value to gold. Gold has a value because everybody attaches it a value. How would you say 1300 or 1600 is the right price for that value ?

Forget Demand and Supply
Just google "gold manufacturing cost". The manufacturing price of Gold itself is 1200$ per oz. See where it is now. Add packing, transport and profit costs.

TSJones · Post by **TSJones** » 10 Sep 2015 18:10

Scenario-2
I bought 10 pounds of wheat at Walmart for 7.5 $ in 2013
I bought 10 pounds of wheat at same Walmart for 8 $ in 2015

as I have stated in a previous message, agricultural products for various reasons are relatively inelastic in demand.

Theo_Fidel · Post by **Theo_Fidel** » 10 Sep 2015 18:32

Altair wrote:The manufacturing price of Gold itself is 1200$ per oz. See where it is now. Add packing, transport and profit costs.

Every mine has its own production cost. There is little to no manufacturing cost.

I believe there is whole passel of mines out there profitable @ $800/oz. Even a handful profitable @ ~ $400/oz. It is the high cost mines above $1200/oz that are suffering.

srin · Post by **srin** » 11 Sep 2015 22:26

@Altair ... the problem with gold is true value - not based on cost of production but on utility. That is how it's different from crude.

If 10g gold cost INR 25K (sorry - can't do mental math with ounces etc), is it over-valued (means - should I sell) or under-valued (should I buy more) or fair valued ? There is no right answer. At the same time, when people lose confidence in a currency, they still retain faith in gold, so there is a variable value to it.

Vayutuvan · Post by **Vayutuvan** » 12 Sep 2015 03:54

I would say even $400/oz is to high for something one can't eat or burn in an automobile or in a power plant. It has no industrial uses beyond Monster cables, extra long USB, or banana plugs

They won't look good on somebody who is severely malnourished with bones showing.

panduranghari · Post by **panduranghari** » 12 Sep 2015 22:26

Srin wrote: the problem with gold is true value - not based on cost of production but on utility. That is how it's different from crude.

Neo-Classical Economics, emerged from the old school of Classical Economics branch. Classical Economics held that value should be donor-derived or determined by the cost to supply a good to market rather than the demand for the good from the market. This is generally called the Labor Theory of Value(LTV). Neo-Classical Economics grew out of the realization that it is the utility of a good that matters more to its value than how much labor it took to produce. Until 1870, LTV was the mainstream theory (since the time of Adam Smith) and it became THE theory after the controversial theories of Karl Marx.

However a journalist called Carl Menger decided to take time off journalism and studied the impact of economy on politics and vice-versa. This was the origin of Austrian school of economics which completely debunked the LTV. It lead to Marginal Theory of Value (MTV).

The Marxian Labor Theory of Value tells you what something's value should be, while marginal utility observes what it actually is, and then attempts to explain the observation.

So you are the very right, Srin saar. GOLD has a value. Its indeterminate. So does crude. But crude has multiple utilities. Gold has only one utility. Its a store of value par excellence.

You have 1 BMW. You go to work in style and safety. This one car could do the job well for a long time. If you buy another one, the value of the earlier one reduces by half. This means the marginal utility has reduced. However, according to LTV - a BMW is a unique piece of engineering. Its awesome with the best technology that's available currently. So based on this LTV each BMW still costs £59,000. Though the marginal utility has reduced!

Now compare it to gold. You buy 1 coin and put it in a bank vault. It sits there, doing nothing. Or perhaps just keeps some value. But it does keep 'some' value over generations. A BMW may rust or crude can go bad, but gold still sits there doing nothing. You buy another gold coin and put it in the same vault. According to the current theory in vogue i.e. Marxian LTV- the gold coin is not giving any yield. And there in is the problem.

Indian housewives do not care. They buy gold because they know it has some lingering value. They wear it, they gift it, they save it. They do not care about chasing an yield. They somehow subconsciously understand the concept of marginal utility of gold.

srin · Post by **srin** » 13 Sep 2015 08:51

And they would be right too.

For the unbanked sector (see Prof Vaidyanathan's lectures), gold is the store of value.
And even for others, it would be store of last resort in case of economic crisis. It is an insurance, not an investment. Which is why I don't protest too much when someone at home buys jewellery that they wear probably once or twice in lifetime.

And for that reason, I really don't understand the gold bonds, ETFs, etc. If you want to buy, buy real gold. Will atleast retain value even when the financial system collapses.

Neshant · Post by **Neshant** » 15 Sep 2015 12:47

I've been busy as hell lately but I thought I'd pop in to post this article.

Its really a warning.

If you have gold investments, DO NOT store it in some supposedly secure vault off in Never never Land. A great number of these "secure vaults" in Switzerland, Singapore, Hong Kong or wherever are bound to be Ponzi schemes in various stages of growth or collapse. READ the article below and get your gold out of there and in your possession. Its frightening really.

Same goes for ETFs, offshore banking and other such "we'll keep it safe for you" ventures.

Downtown Austin vault of precious metals turns up mostly empty

Desperate for something of value he literally could put his hands on, he began acquiring gold and silver bullion. “Its value is in its physicality,” Barbala said. “It just is.”

Over the next several years, Barbala bought more than $100,000 worth of precious metals through a little-known downtown Austin company. Started in 1999, Bullion Direct began as an online virtual trading floor where thousands of customers could buy and sell precious metals to each other, with the company taking a cut of each sale.

Later, it began selling the metals to customers directly. It also stored the commodities for those who requested it — such as Barbala — with the glittering coins and bars kept safely in individual piles for each investor in an old bank vault in its Lavaca Street offices.

At least that’s what everyone thought.

By the time auditors and lawyers got access to Bullion Direct’s 14th-floor offices six weeks ago, there were only a handful of gold and silver coins in an office safe. A second vault it had recently rented held only slightly more.

An estimated $30 million in cash, metal bullion and valuable coins, meanwhile, had vanished.

Read the entire article for your own good :

http://www.mystatesman.com/news/news/lo ... up-/nnYS2/

Austin · Post by **Austin** » 15 Sep 2015 15:54

US financial bubble ready to burst - Robert Shiller

More and more investors are expressing concern that US stocks are overvalued, which may result in a major bear market - characterized by falling prices and widespread pessimism, Nobel laureate in economics Robert Shiller told the FT.

Studies have shown that the level of uncertainty among investors has peaked since the end of the dot-com boom in 2000, said Shiller.

Fifteen years ago, the US technology sector index, the Nasdaq Composite, lost 78 percent of its value, falling from 5046 to 1114 points.

“It looks to me a bit like a bubble again with essentially a tripling of stock prices since 2009 in just six years and at the same time people losing confidence in the valuation of the market,” he said.

Shiller also doubted the significance of the possible US Federal Reserve rate hike this week, adding that it’s “impossible to time any fall in the market.”

“It’s been talked about for so long, everyone knows that it’s coming. It’s just not much of a big deal. You would think that when interest rates are higher people would sell stocks, but the financial world just isn’t that simple,” he said.

Last week, German Finance Minister Wolfgang Schauble also warned of a market bubble. “We should learn the lessons from the last [2008-2009 global financial] crisis," he said on Friday.

Singha · Post by **Singha** » 15 Sep 2015 19:25

Neshant sir who absolutely detests paper money, ETFs, stocks etc would nearly have a heart attack if you ask him to park his net worth in bitcoin

panduranghari · Post by **panduranghari** » 15 Sep 2015 19:43

Weakening Real and rising dollar denominated debt in Brazil.

panduranghari · Post by **panduranghari** » 15 Sep 2015 19:49

http://www.bloomberg.com/news/videos/20 ... ven-asset-

Gold does not give any yeild. Million mercies to Indian housewives.

RoyG · Post by **RoyG** » 15 Sep 2015 19:52

Altair wrote:Scenario-1
I exchanged 1600$ 2 years back to get 1 oz of Gold.
I exchange my 1 oz of Gold today and get 1110$ back in cash.

Scenario-2
I bought 10 pounds of wheat at Walmart for 7.5 $ in 2013
I bought 10 pounds of wheat at same Walmart for 8 $ in 2015

Assumption-1
Gold value is constant
Does it mean => $ has actually increased its value.?

Assumption-2
$ value kept constant
Does it mean => Gold lost its value, It became cheaper for various reasons?

What actually is happening is manipulation by Central Banks of both $ and Commodities before inevitable Hyper Inflation. Nothing is getting cheaper.

Gold's value stays the same like you said. It's the currency which increases or decreases depending on the notes in circulation. So far, the only common denominator between all major central banks is their gold holdings. With the dollar slowly losing its reserve status, the world needs a common denominator with which to measure their currency against. There are only two options at this point: Gold and SDR.

panduranghari · Post by **panduranghari** » 15 Sep 2015 19:55

RoyG

Unfortunately, neither options are viable.

Gold cannot be monetised. There is a trust deficit about this.

SDR was a option according to Robert Triffin (who designed it) when there was no alternative to the dollar.

Today there is a very viable alternative to the dollar - The Euro.

Vayutuvan · Post by **Vayutuvan** » 15 Sep 2015 22:26

Here is the bitcoin reference (Amazon link).

Understanding Bitcoin: Cryptography, Engineering and Economics (The Wiley Finance Series) 1st Edition.

(Neshant ji. please ignore

)

member_26147 · Post by **member_26147** » 16 Sep 2015 01:58

panduranghari wrote:RoyG

Unfortunately, neither options are viable.

Gold cannot be monetised. There is a trust deficit about this.

SDR was a option according to Robert Triffin (who designed it) when there was no alternative to the dollar.

Today there is a very viable alternative to the dollar - The Euro.

Hahaha, nothing could be further from the truth. Eurozone is deep in red, the countries constantly bicker and moan with Germany and France fed up of paying for the other countries' incompetence. Eurozone itself will not exist in the next 10 years, forget about the Euro.

member_29172 · Post by **member_29172** » 16 Sep 2015 02:13

panduranghari wrote:RoyG

Unfortunately, neither options are viable.

Gold cannot be monetised. There is a trust deficit about this.

SDR was a option according to Robert Triffin (who designed it) when there was no alternative to the dollar.

Today there is a very viable alternative to the dollar - The Euro.

Euro is a failed system and with the influx of migrants, stupid economic policies that go nowhere, hegemony of Germany, UK, France on the sovereignty of other member states, I don't think it'll last for the next 10 years. Never mind the fact that, it got the nobel prize bang in the middle of one of it's worst recessions

It's either Unkil's green toilet paper that unkil can print as much as he likes or a mix of Ruble, Yuan and Rupees. We need to work on our economic system to get Rupees there. UK's banks are already bending over to Chinese Yuan. That's where the future is.

The gold example above misses the very important fact that, gold prices might depreciate temporarily, it always bounces back and goes higher. This is especially true in the Indian context. 10 grams of gold was around 1000 rupees in 50s, 4000 in 80s and 10,000 now I think. While the value of rupee itself has depreciated considerably.

Gold is an investment worth having.

TSJones · Post by **TSJones** » 16 Sep 2015 09:10

the euro is a very strong currency and will remain that way due to German influence.

forget about gold standard as no western currency in its right mind wants to defend the price of gold,

Asian countries are welcome to do it if they think they are up to it.

Monetize it all you want.

RoyG · Post by **RoyG** » 16 Sep 2015 09:58

Tell the fed to give us all its holdings then. Why hold on to it?

RoyG · Post by **RoyG** » 16 Sep 2015 09:59

panduranghari wrote:RoyG

Unfortunately, neither options are viable.

Gold cannot be monetised. There is a trust deficit about this.

SDR was a option according to Robert Triffin (who designed it) when there was no alternative to the dollar.

Today there is a very viable alternative to the dollar - The Euro.

It can and it will. It won't be redeemable but it will give the world a much needed standard. Backing may go as high as 40%.

TSJones · Post by **TSJones** » 16 Sep 2015 11:19

RoyG wrote:Tell the fed to give us all its holdings then. Why hold on to it?

very simple, it doesn't own any gold to give to you.

it is merely a custody agent for governmental entities, mostly foreign.

it does own about $11.04 billion in gold certificates issued by the department of the US Treasury when the Fed was forced to turn over its gold to the US Government, but it cannot convert these certificates into gold. these certificates are kept on the books at $42.22 per ounce valued in 1973.

It. Can't. Own. Physical. Gold. By. Law. US Gold Act 1934.

TSJones · Post by **TSJones** » 16 Sep 2015 11:21

RoyG wrote:
panduranghari wrote:RoyG

Unfortunately, neither options are viable.

Gold cannot be monetised. There is a trust deficit about this.

SDR was a option according to Robert Triffin (who designed it) when there was no alternative to the dollar.

Today there is a very viable alternative to the dollar - The Euro.
It can and it will. It won't be redeemable but it will give the world a much needed standard. Backing may go as high as 40%.

good. go get 'em tiger!

Altair · Post by **Altair** » 16 Sep 2015 11:21

JP Morgan has 335 Kgs of Gold left

One week ago, when we reported the record plunge in registered gold held by the various Comex gold warehouses in general, and JPMorgan in particular, which saw the "gold coverage" ratio, or the number of paper claims through open futures interest for every ounce of deliverable gold, soar to what we then thought was a record, and unsustainable 207x, we thought this situation would be promptly rectified as a few hundred thousand ounces of eligible gold would be "adjusted" back into the "registered" category.

Not only has this not happened, but with every passing day the situation is getting progressively worse.

According to the latest Comex vault data, not only was another 157K ounces withdrawn today, but the conversion of Registered into Eligible continues, and as a result another 10% of total deliverable gold was "adjusted away", leaving just 163,334 ounces of registered gold: the lowest in Comex history.

As a result, the ratio of Eligible to Registered gold is now a record high 41.2x in the history of the Comex.

Once again the culprit for the decline was JPM which saw not only a 122,124 ounces of Eligible gold be withdrawn, reducing the total by 13% to 750K ounces, but 8.9K ounces of registered gold was pushed into the Eligible category, in the process reducing total JPM registered gold by 45% overnight to a paltry 10,777 ounces: this amounts to only 335 kilograms of gold, or just 27 bricks of "good delivery" gold.

Finally, since aggregate gold open interest continues to remaing consistent at just about 41 million ounces of gold, today's latest ongoing reduction in deliverable Comex gold means that as of yesterday's close, there was a record 252 ounces of gold paper claims to every gold physical ounce of currently available and deliverable gold.

To summarize: last week we were confident that JPM would promptly adjust a few hundred thousands ounces of Eligible gold back into Registered status to silence growing concerns about Comex distress. A week later we are not as concerned by the relentless surge in paper gold dilution, as we are that JPM still has not even bothered to do this. Especially since with just 335 kilograms of gold, or less than 27 bricks, JPMorgan is now just one withdrawal request away from running out of deliverable physical gold

There are probably hundreds of families in Andhra and Kerala who own more than 500 Kgs of Gold!! The Bankruptcy of West is delicious!! The Emperor is Nude!

Altair · Post by **Altair** » 16 Sep 2015 11:34

How can a giant like JPM is left with just 335 Kgs of Gold? I am baffled! It is so tiny that, if it was not so tragic it would have been a comedy! Even middle class families of South India hold atleast 0.5 to 1 Kg of Gold at any given time. Well to do families hold atleast 100 Kgs of Gold. This is more so in Kerala, AP. I am not so sure about TN. I heard Jagan and Bellary Reddy's have north of 1000 Kgs of Gold but thats a different issue.
I had a mental picture of JPM as some big financial powerhouse that MBAs from Harward or other B-school grads go and do wonders with some slick strategies. What a shame!

TSJones · Post by **TSJones** » 16 Sep 2015 11:38

There are probably hundreds of families in Andhra and Kerala who own more than 500 Kgs of Gold!

!

let's see now,

that's 1 kilogram = 32.15 troy ounces

500 kgms = 16,075 troy ounces

16,075 troy ounce x $1100 = $17,682,500

hundreds of families have this?

very impressive, I would have to say.

Altair · Post by **Altair** » 16 Sep 2015 11:45

TSJones wrote:
There are probably hundreds of families in Andhra and Kerala who own more than 500 Kgs of Gold!
!

let's see now,

that's 1 kilogram = 32.15 troy ounces

500 kgms = 16,075 troy ounces

16,075 troy ounce x $1100 = $17,682,500

hundreds of families have this?

very impressive, I would have to say.

I may be even understating here. 500 Kgs of Gold is INR 130 Cr. This is really really tiny for some well to do families in South India.

RoyG · Post by **RoyG** » 16 Sep 2015 11:47

TSJones wrote:
RoyG wrote:Tell the fed to give us all its holdings then. Why hold on to it?
very simple, it doesn't own any gold to give to you.

it is merely a custody agent for governmental entities, mostly foreign.

it does own about $11.04 billion in gold certificates issued by the department of the US Treasury when the Fed was forced to turn over its gold to the US Government, but it cannot convert these certificates into gold. these certificates are kept on the books at $42.22 per ounce valued in 1973.

It. Can't. Own. Physical. Gold. By. Law. US Gold Act 1934.

Haha, custodian...That's a good one. Why didn't they just comply with the German request? They do "own" it.

RoyG · Post by **RoyG** » 16 Sep 2015 11:48

good. go get 'em tiger!

I got a better one for you kiddo. How about Fort Knox?

Austin · Post by **Austin** » 16 Sep 2015 11:49

Will She or Won't She?

panduranghari · Post by **panduranghari** » 16 Sep 2015 11:55

DhruvP wrote:
Hahaha, nothing could be further from the truth. Eurozone is deep in red, the countries constantly bicker and moan with Germany and France fed up of paying for the other countries' incompetence. Eurozone itself will not exist in the next 10 years, forget about the Euro.

Really. You have been at this condescending posting for a long time and now you are back with some statements which you cannot back with any proof. Look cheif, I am not here to convince you. Au contraire run away from me if you think I am selling snake oil.

I wrote this in May 15. I did also in Jan 14 and sometime before that too.

viewtopic.php?f=1&t=1351&p=1837700&hili ... e#p1837700

I have said this before and I say it again. Don't believe all the noise, and there's a tonne of it right now. They don't know what they are talking about. The euro survives and thrives regardless of how the European debt crisis is ultimately resolved, and no countries will leave the euro. In fact, there are countries trying to get in, and none that will leave short of a coup, revolution or state failure, which isn't even a consideration right now. And even if that happens, the euro will still survive and thrive while the country that leaves will suffer greatly, the local hyperinflation that will ensue being the least of their problems. Isn't leaving the Euro the thing that everyone has advised Greeks. But why are they not leaving?

Spend some quality time with the Eurosystem's balance of payments http://www.ecb.europa.eu/stats/external ... ex.en.html and marvel at how remarkably balanced Europe is with the rest of the world. Then compare that with the US balance of payments http://www.census.gov/foreign-trade/index.html . As just a quick example, in February(one month) the Eurozone imported only €1.6 billion more goods than it exported. The US, on the other hand, imported $35.5 billion more goods than it exported, and February was the lowest month yet from Last Feb(2014) for the US. Of course that's just goods. For services, the US exported $0.1 billion more services than it imported. How much of that do you think was "Wall Street financial services"? Europe also exported more services than it imported, but only €2.8 billion.

So for goods and services combined, the Eurosystem ran a trade deficit of €0.5 billion in Feb, while the US ran only a $35.4 billion deficit. Looking back at 2014 (just to get a full year's picture) the US ran a $500 billion goods and services deficit for the year. The Eurosystem (even with those lazy PIIGS) actually ran a trade surplus for the year, exporting more goods and services than it took in! So how can that be? As a currency representing a community of more than 300 million (or is it 400) people, the euro is quite healthy compared to the dollar!

Of course there is a huge imbalance inside Europe between the states running a large surplus and those running a large deficit. But with a shared currency the adjustment pressure for such an imbalance is foisted elsewhere, not on the currency. It lands squarely on the politicians, who couldn't be a more deserving bunch of A-holes. For the dollar, the structural deficit and debt of the US places a massive devaluation pressure directly on the dollar. But for Europe the currency is balanced with no (or very little) adjustment pressure.

The economic flow of goods and services within Europe will of course have to contract as the imbalance retreats. If the euro weakens on the global currency stage Europe will start running an overall trade surplus again, like China, which will soften the blow of a contracting internal economy. If the euro strengthens, things like cheaper oil will help soften the contraction. Internally the politicians have their hands full. No doubt! Externally, the euro is just fine. To the euro, the politics of the PIIGS and Germany are little more than a sideshow.

And did anyone mention gold yet? Check what constitutes the 1st line of Eurosytem balance sheet? Google it. Anything that would appear to seriously threatens the euro, like an outright sovereign debt default, would explode the price of gold which would simultaneously rescue the euro balance sheet and kill the dollar. Euro is the only currency in the world that has severed the link to gold and to a nation state.

[/quote]

There is too much noise. Besides time of all will prove things.

panduranghari · Post by **panduranghari** » 16 Sep 2015 11:56

Alka_P wrote:
Gold is an investment worth having.

Gold is not money. Neither is it an investment.