Silver as an investment

3 More countries dumping the dollar!

Buy food and physical silver

One Comment

  • Posted August 20, 2011 at 9:02 am | Permalink

    While I am a silver owner myself and a long-term US dollar bear (fiat currency bear in general), I must say that we are due for a major correction in the US dollar. It is my belief that the recent equity sell-off was less a function of S&P downgrading the US credit rating or even the European debt crisis and more of a result of the US dollar trying to find its true value after QE2 has come to an end (much like in QE1 and remember, we had Greece then).

    Looking at the implied purchasing power parity metric (which I will say is not the best metric for valuing a fiat currency but does carry some weight), it is obvious that the US dollar is undervalued against most developed nations currency. While our monetary policy is a disaster, we are in a full blown currency war. Central banks around the world are now playing the game we started (i.e. Swiss, Brazil, Europe, Japan, etc). I suspect more CB’s will join the “party”. This, itself, will help prevent the US dollar from falling at the same “rate of speed” as it has before. More and more central banks will fight back against the Fed in the wake of their easy money policy.

    What you talk about in this video is very true in that CB’s are moving away from the US dollar, however they are not moving away from it completely or at rate as fast as many people believe. In the fiat currency world, there really is no other alternative than the US dollar as of right now. The US dollar still does have purchasing power let’s not forget. I have to buy my essentials in USD, not in silver or gold. Yes, we may very well no longer have a world’s reserve fiat currency in a few years and we are also seeing CB’s buy gold hand over fist which in turn gives gold a Central Bank Put. As you stated in the video, you may see regional parts of globe hold their “friendly” neighbors currency as reserves versus USD but should continue to see CB’s fight in the currency war, I do not think that is much of an option either considering we are an intertwined global marketplace.

    I am not arguing against your point. In the long run, I agree with you. However, many people are calling for the demise of the US dollar slightly earlier than I suspect will occur. The market is telling us right now that the US dollar is stronger than what its perceived value is. Yes, Ben can continue to print away but he will have to do it at a much faster rate and on a much larger scale. Could he do that? I wouldn’t put it past him one bit, but I do not think that will occur. I do not think the people will allow it to happen – whether they directly know it or not.

    The market is getting wise to the antics of the Fed. Looking at QE1 and how equities reacted and then looking at QE2 and the reaction in equities, it is clear that it is having less and less of an effect on stocks and moreover, a greater impact on food and energy prices (other commodities as well).

    Therefore, in this present time, I believe deleveraging will continue for many years to come. US dollars will grow in value relative to other fiat currencies, but in the end, gold and silver (and let’s not forget platinum which is a hell of a deal right now) will prevail… it will just take more time than many are predicting.

    By the way, you never made a prediction per se in when you think the dollar will fail… I am not sure you even used that term. I was speaking in general from others I talk to on a daily basis.

    Thanks for the vid,


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