All Posts Tagged With: "U.S. dollar"

One way to view a currency, we read somewhere recently, is as a national obligation secured by national assets. Those “assets” are loosely defined as economic growth (GDP) or the tax revenues a government can generate. A growing economy generates royalties and income taxes and demonstrates to international bond investors Australia’s ability to service interest and principal on debt.

According to a pair of researchers from the University of Michigan, a depression does more for longevity than diet or exercise.

On one hand, the deflationists are claiming that given the extremely high debt levels in the West, further inflation is impossible.

“In other words, leveraged speculators are borrowing US dollars in the short-term money markets at near-zero rates to buy bonds in higher- yielding currencies like the Australian dollar or the euro.

“We may now be entering the Asian century, dominated by a rising China and its currency. This decline of the dollar might take more than a decade, but it could happen even sooner…

The burden of today’s Daily Reckoning , then, is to remind these nattering nabobs of negativism that gold is not anyone else’s debt. It is not anyone else’s liability. It cannot be created with a few keystrokes. And for thousands of years, millions of people from all walks of life have been happy to use it as money because of its unique features…

Their report makes some of the right noises, “The dollar-based reserve system is increasingly challenged.” Hmm, a slight understatement there. If “increasingly challenged” is a euphemism for “dead” then we’d agree.

But we don’t think that’s what they mean.

In the “old normal” view – preached by politicians left and right and amplified by a compliant media and a smarting financial industry – you should go back to doing what you were doing before. Have a short memory. Buy stocks automatically because they always go up. Get a mortgage and buy a house, perhaps even a second one. Spend money. The government will make more.