Good discussion on monetary policies and the need for fiscal discipline

Stephen Roach, former Morgan Stanley chief economist breaks down the risks facing the U.S. recovery; the cost of Fed policies; whether China’s economy is hitting a wall; and the race for the White House, with GOP presidential candidate, Rep. Ron Paul, (R-TX). Here is a direct link to the video.

The thing which is so often missed in these discussions is that nominal gains in the price of gold have come and gone over the centuries in the classic swings of human obsession. But gains not converted to other necessities are not retained by investors. In addition those who have the bulk of their wealth in currencies other than the US dollar have not “made” the increase in prices over the past decade. Canadians, Australians even Europeans have seen their currency appreciate against the US dollar. This means that those of them holding precious metals (priced in US dollars) have not netted the gains in the rocks. A falling US dollar has taken away a large part of any nominal gains in the price of precious metals. So many of those selling the commodities story the past 10 years have come from the US and far too many gullible followers gobble up the spiel without understanding this important distinction.

In any event, the global risk sky is falling again this morning, as the French and Dutch governments succumb as the next casualties in the world’s epic war with debt, and we have gold, silver, platinum all falling…much to the chagrin of those arguing that precious metals are safe havens. Let us get this straight: true safe havens are water, food, air and things that can be quickly converted in exchange for these essentials. The western population is so physically unfit today, they could not possibly lug around bags of metals to buy their necessities. Facts must be faced.

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One Response to Good discussion on monetary policies and the need for fiscal discipline

  1. aliencaffeine says:

    Finally the scales fall off the lids, and the eyes can see clearly. Yes, the true necessities are FOOD, WATER and AIR. Then comes clothing and shelter. The old Maslow’s Pyramid. Notice he never mentioned ‘gold, silver nor platinum’.

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