Jan 08
16
Global Financial System And The Rise Of Gold
How long does it take for a story online to build up a head of steam and move beyond the rumour stage into becoming fact?
Over the last two years (and more) pundits have been talking about the problems with the US fed and the fiat dollar. Friends who are in the financial markets have been saying to me that there is still some steam left in the market and it is all about knowing when to get out.
We are now seeing the major investment banking houses taking massive multi-billion dollar write downs from their exposure to subprime and even the ones who don't have direct exposure are going to get hit.
world’s largest financial institutions, in particular for all those who
do not yet fully understand the meaning of ongoing tendencies and
therefore who remain largely involved in the US dollar system currently
imploding. These institutions will experience, to a much larger degree,
what those who failed to anticipate the subprime crisis experienced,
now being on the verge of disaster
Stephen Roach says that it is not about the US dollar. It is about the unrealistic prices on American assets.
economy. It is the only realistic hope to shift the mix of saving away
from asset appreciation back to that supported by income generation.
That could entail as much as a 20-30 per cent decline in overall US
housing prices and a related deflating of the bubble of cheap and easy
credit.
The problem for the rest of the world is that our economies are all reliant in no small part on the American consumer.
What we are also seeing that I don't believe any of the pundits or the central bankers or the investment bankers for that matter have considered in their models, is the massive change in how the public now is able to share information.
Because of the accelerated speed of communications we now have not just a rumour mill that takes place online, we have an environment. This is critical.
The communications environment gives people an urgency to act together.
As people start seriously reading about gold being a storehouse of value, I believe that there will be a massive move to invest in gold bullion, securities etc. We already know that demand is greater than supply. What is that going to mean to the price of gold?
The dollar is at risk. The global markets are at risk. Gold is solid and tangible. I believe that we are going to see a new gold rush where gold will go to heights that no one can imagine – and all driven by instant communications, rumour and a distrust for anything that looks like it has the thumbprint of banks on it.
We shall see.