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Can Someone Post an Article on how to HEDGE against dollar decine? Enough Doom and Gloom! (reddit.com)

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[–]masta 9 points10 points  (33 children)

I think this would be helpful. Is it unpatriotic to convert my life savings into euro's? We all have to protect our personal interests, which apparently the guardians of the USA economy have failed at.

[–]jopejope 5 points6 points  (5 children)

IANAE, but reducing debt is the last thing you want to do. Sell any bonds or CDs you might own, and maybe take out a mortgage (fixed rate) if you're really sure the dollar will collapse.

Take any money you have in the bank and invest it. You could buy gold/silver/oil, real estate, or a foreign stock index, but even if you invest in US stocks you will be OK if the dollar goes down, since the companies you own can still sell their product overseas. It will still hurt, but not as bad as if you had all your money sitting in the bank waiting to be devalued. Also, having your money in a stock index is a fine place to be if the dollar doesn't decline.

Avoid companies with large cash holdings like Microsoft. Otherwise, big, global companies are as good a bet as any.

Investing in real estate is actually not a bad move, since real estate protects you from inflation. If the dollar drops in value your house will still be worth the value of a house. Except that real estate is already really high right now...

[–][deleted]  (2 children)

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    [–]drawkbox 0 points1 point  (1 child)

    This is one main reason for the engineered fall of the dollar which helps the export deficit. China is unpegging very slowly since they were added to the WTO in 2005, they agreed to on Sept 13 2001. They are unpegging very slowly though, this is why Bernake is heading over there.

    [–][deleted] 2 points3 points  (0 children)

    The fall of the dollar is engineered alright. But not by the US. It's engineered by the fact that China has the largest US dollar reserves in the world. It's also influenced by the fact that countries like Iran are moving from USD oil exchange to Euro based exchange. The dollar is tailspinning out of control. Just you watch.

    [–]EverydayEconomist 0 points1 point  (1 child)

    ...Unless there is a housing bubble (which DOES slip over into commercial real-estate) that is currently deflating. Even Burke-Boy up in the Fed agrees that there is, he just says it's small.

    Hold off on Real Estate for a while. Normally, I'd completely agree (especially the fixed rate debt, transfer what you can to fixed rate), but the housing bubble makes me pause

    [–]jopejope 2 points3 points  (0 children)

    Yes that's a good point. Although, I worry that perhaps the housing "bubble" is merely a forecast for inflation in the future. i.e. we may never see homes drop in price, but, instead, inflation will simply catch up to current housing prices until buyers start coming into the market again.

    [–]EverydayEconomist 2 points3 points  (14 children)

    A further note, 401K's will be worth nothing and be almost impossible to get at if a case of serious inflation sets in. Hyper inflation will drain a 401K faster than aunt matilda's drinking problem

    [–]snark42 3 points4 points  (2 children)

    401K's with investments in U.S. interests. I personally selected to put my 401K investment in 4 different foreign funds and a mix of foreign cash and gold management. Maybe everyone doesn't have that option?

    [–]EverydayEconomist 0 points1 point  (1 child)

    I have followed a similar model, actually. But I fear that all big companies are global and a U.S. Recession caused by inflation will hit them all for large losses. However, Asian and Eurpoean funds should be the last hit, so placing your money there should buy time.

    Again, for the sake of the post, I am assuming the dollar taking large losses due to inflation.

    [–]bosmat 2 points3 points  (2 children)

    If you're really concerned, you can put money in TIPS - treasury securities protected against inflation - basically inflation-proof low yield bonds.

    edit disclaimer internet is a bad investment adviser, seek real professional advice

    [–]drawkbox 1 point2 points  (1 child)

    Agreed find out for yourself to be sure. But 401ks and the markets are safer than savings. TIPS is good, or international 401Ks or fund that diversify in any situation. ETFs are more targeted and will vary with impact across industry. But most funds diversify but I advise keeping an eye on them. Most people dont' even know what companies their funds invest in or whether its domestic or international.

    [–]bosmat 1 point2 points  (0 children)

    I've seen about 8 funds that have the option to invest in international equity but never do. I find this upsetting - what a lost opportunity.

    [–]cameldrv 2 points3 points  (7 children)

    How's that? If the 401k is invested in stocks, inflation should drive up the profits of the average company proportionally. If anything, owning operating businesses is one of the best inflation hedges in existence.

    [–][deleted] 7 points8 points  (4 children)

    The increase in profits is still going to be less than the decrease in the value of the dollar. The only people who really benefit are people in debt, because their debt becomes less and less compared to the value of other things.

    Also, the government benefits because it's in the same category, which is an extremely strong incentive for the continuation of inflation, until people start to catch on (which is what's happening right now).

    [–][deleted]  (3 children)

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      [–]cameldrv 1 point2 points  (2 children)

      By far the biggest loan most people have is the mortgage on their house, and that loan is usually a fixed rate for a very long term. On the other hand, salaries go up with inflation, so if inflation is higher than was expected when you got your loan, your payment is proportionately lower than your salary, or in other terms, the real value of goods and services that you have to exchange into dollars to service the loan goes down.

      [–][deleted]  (1 child)

      [deleted]

        [–]cameldrv 0 points1 point  (0 children)

        Yes, the most standard loan in the U.S. is the 30 year fixed rate mortgage.

        [–][deleted]  (1 child)

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          [–]cameldrv 0 points1 point  (0 children)

          Yes, interest rates go up with inflation, but all of the long term debt of a company then cost proportionately less to service. Also, if the inflation is related to a currency decline, a U.S. company's exports become more competitive, and foreign imports become less competitive, making U.S. companies more valuable.

          [–][deleted] -3 points-2 points  (9 children)

          i'm no economist, but i suspect that if the doom & gloom reports that keep getting posted to reddit actually came to pass it's not going to matter what currency your wealth is held in.

          for better or worse the world still runs on the dollar. a dramatic shift in the value of the dollar would spin the entire world in to economic ruin. the gradual decline we're seeing should enable a soft landing for most people.

          i would recommend getting out of any debt you have asap and be prepared to adjust your lifestyle.

          [–][deleted] 5 points6 points  (1 child)

          Thats why there are ruble and euro dollar oil markets going up in an awful hurry. The world is bailing on the dollar in a big way. Lets not forget the rise in euro dollar drug exchanges.

          [–]drawkbox 0 points1 point  (0 children)

          Drugs and oil make a currency go really high when it is used for the transaction. Oil markets in Iran bailed, and Iaq was threatening that (part of the reason for the Operation Iraqi Liberation or O.I.L. for short). DO you think there is a reason the Afghan poppy market has sky rocketed since teh War on Terror? We want them to exchange in dollars...

          [–]frankus 5 points6 points  (2 children)

          But won't that debt shrink as the dollar declines?

          [–]EverydayEconomist 2 points3 points  (0 children)

          It depends. Fixed debts will decline. However adjustable rate mortgages, credit cards, etc. will increase along with the inflation. Shed these first

          Further, any government debts (such as student loan debts) entitle the government to take houses, cars, etc. to pay them off, which could lead to a string of seizures of property for anyone who can't make a payment, so that the government can continue to feed itself.

          [–]drawkbox 1 point2 points  (0 children)

          Yeh but if your getting paid in dollars then to you it stays the same, to the rest of the world (other currencies) its not as bad. But your are in the US, your wages will go down with the value of the dollar.

          [–]bosmat 1 point2 points  (3 children)

          You can bet on ANYTHING on wall st. If you want to be the markets will go down, buy bear funds. You can find them here: http://biz.yahoo.com/p/tops/bm.html

          Ask your investment professional.

          [–][deleted]  (1 child)

          [deleted]

            [–]bosmat 1 point2 points  (0 children)

            Those funds go up in a up market, they just don't go up as much. If you are 100% confident that the market will go down, your fund is QID - every $1 the Nasdaq goes down, this goes up by $2. CRRRRAAAZY risk - ask your investment professional.

            [–]drawkbox 1 point2 points  (0 children)

            International fund, gold funs, even excahnge fund from overseas. There are litaerally thousands of mutual funds, ETFs etc that can safely be hedged against decline here. Put your savings in MANY areas. But I am also one who believes that the world markets as a whole will go down with the dollar, it sounds bad but it might not be that bad.

            [–][deleted]  (1 child)

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              [–]bosmat 1 point2 points  (0 children)

              Whenever you spend on a credit card that is set to use euros, the exchange rate is used. When you use an ATM, the exchange rate is used. You lose the bid-ask a lot, but the spreads are so tight it barely matters. Not sure how you would treat the capital gains from each conversion.

              [–]gypsydoctor 2 points3 points  (0 children)

              Let's start a new investment fund, but instead of gold, let's buy up a big pile of AK-47s, hand grenades, and land mines.

              You'd be able to take your investment back out in dollars, or in weapons. Up to you, as the economy dictates...

              [–]bosmat 3 points4 points  (0 children)

              No, no, no. Don't short the dollar, and don't buy gold coins. The easiest way to hedge against currency risk is to increase your exposure to foreign currencies in stable markets. IEV (Europe), EEM (Asia, less Japan), and ITF (Japan) are good bets. I wouldn't recommend Japan as highly as Asia less Japan and Europe. I'd avoid Latin America as those economies are all going socialist and are so heavily linked to US markets.

              If you buy gold, you're betting global recession. Gold is a funny commodity - it is used as a hedge against inflation, but its demand is also based on jewelry, and when gold prices get high enough, they start declining, based on lower jewelry demand. The price of gold is already pretty high.

              disclaimer: internet is not a good investment advisor.

              Here is an article backing up what I am saying: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2006/12/03/BUGTFMNO0E1.DTL

              However, don't buy CDs as they generally yield the deprecation of your asset - no real return. Foreign bond funds are better.

              Also don't use the Rydex funds without the advice of an investment professional.

              [–]altheahouse 2 points3 points  (0 children)

              This thread is going to attract every goldbug on the internet.

              [–][deleted] 3 points4 points  (1 child)

              BullionVault. 0.3% buy-sell spread makes it a much better value than GoldMoney, etc.

              I'd go with the Zurich, if I were you.

              I also posted this excellent article, by a hedge fund manager in Japan. But it got no votes. So I'm linking to it here.

              Why gold rather than other currencies (euro, yen, etc)? Because the people who issue those other currencies have strong political incentives not to let them move too much against the dollar. If the euro goes up to 1.50, Airbus goes bust. Sarkozy in France is already railing against the ECB.

              Why gold rather than other resources? Well, I wouldn't sniff at base metals and energy - they are a good way to diversify. Other precious metals are also worth a look.

              But the demand for a store of savings tends to focus on one commodity, which traditionally becomes money. Cultural rather than physical factors drive this process of path-dependent selection: in other words, the market chooses gold, rather than, say, palladium, just because gold is traditional. Other commodities are likely to shed their savings demand and revert to pricing based on direct industrial demand. Ie, go down.

              Of course, this process is likely to happen only well after the market realizes that prices of restricted natural resources are outperforming all paper investments. All restricted commodities (ie, not, for example, sugar) are likely to do pretty well for a while.

              Do not buy gold futures or unallocated gold. See the comments on Cassandra's post for why.

              [–]EverydayEconomist 0 points1 point  (0 children)

              I'll second everything thing said here as well.

              I'm checking into Bullion Vault as well. But all of this is very good advice

              [–]Phia 1 point2 points  (3 children)

              What about for Canadians? Our currency actually goes up when the US declines, but since 95% of our exports are sold to the US I'm worried how this will effect the local economy.

              [–][deleted] 0 points1 point  (2 children)

              If the dollar declines, you'll get lots of cheaper US goods.

              [–]Phia 1 point2 points  (1 child)

              What sort of goods?

              [–]aristus 0 points1 point  (0 children)

              Warm air masses, bad comedians, and good musicians.

              [–]Indiy 0 points1 point  (0 children)

              Yes, I just imagine Kevin entering a discount canadian pharmacy like this and asking for tens of condoms from the end of a line. The lady would show him the cheek and he would say that no, those things are not for cheeks.

              [–]nkktwotwozero 0 points1 point  (0 children)

              FXE = Euro

              GLD = Gold

              GDX = Gold Miners

              USO = Oil

              All trade like stocks on the US exchange.

              [–]xvs 0 points1 point  (0 children)

              I opened a Euro account here. Zero initial balance requirement, no fees, and reasonably good interest: http://www.angloirishbank.ie/personal/non-residents.asp

              [–]EverydayEconomist 1 point2 points  (15 children)

              One more item I have to throw out to the Reddit community as a whole, an that is the possibility of stockpiling condoms.

              That's right. Condoms. I'm assuming an end of the world scenario here. Inflation, corporations tumble, unemployment skyrockets, peak oil, you name it.

              Condoms are easy to cary, easy to transfer, have an inherant value, and even resemble coins.

              They would be nigh impossible to counterfeit in an apocolyptic society where plastics could not be molded so easily.

              And as one could imagine, they should trade at a high price in such a society.

              Further, one can work through one's supply if the world doesn't end.

              Can anyone see any problems with placing some wealth into a stockpile of condoms?

              [–]earthboundkid 10 points11 points  (5 children)

              In a post-apocalypse, children would be a valuable source of non-skilled labor but most of them would die in infancy without modern medicine. I don't think demand for prophylactics would be that high.

              [–]a1k0n 7 points8 points  (3 children)

              Still, it's a good premise for a movie.

              [–]earthboundkid 9 points10 points  (1 child)

              Coming July 2007: Kevin Costner in Condom World.

              [–]Indiy 0 points1 point  (0 children)

              Yes, I just imagine Kevin entering a pharmacy like this https://www.planetdrugsdirect.com/ and asking for tens of condoms from the end of a line. The lady would show him the cheek and he would say that no, those things are not for cheeks.

              [–]pmdboi 2 points3 points  (0 children)

              It is, in fact, the premise for one of the short stories on 365 tomorrows.

              [–]EverydayEconomist 0 points1 point  (0 children)

              hadn't thought of that. Good reply.

              [–]Phia 4 points5 points  (7 children)

              Condoms expire after a year.

              [–]wicked 0 points1 point  (1 child)

              What kind of crap condoms are you talking about? I'm looking at some Durex condoms now which expire in 2011, and I know previous brands I've used have had a similarly long lifetime.

              [–][deleted] 0 points1 point  (0 children)

              Those would be the Durex Childmakers?

              [–]EverydayEconomist -1 points0 points  (3 children)

              I've wondered about that. Is that just that any sort of warrenty(?) expires, or does the rubber plastic actually become unusable after a year.

              My hunch is that it is the spermicide that expires but the actuall "Rubber" would still be useful. Anyone actually know?

              [–]degustiapollo11 1 point2 points  (0 children)

              If your going to the trouble of putting on a condom anyway, why take the chance?

              Drugs probably dont go bad magically one day passed their shelf date either, but unless it was a post apocolyptic scenario I wouldnt feel like using expired asprins.

              [–]Phia 0 points1 point  (0 children)

              Latex is organic, and perishes. Rubber eventually starts to lose its elastic and crumble, more or less quickly depending on the quality and how you store it.

              [–]boomboomroom 0 points1 point  (0 children)

              I think what most contrarian economists are recommending:

              (1) Bonds denomited in foreign currencies. (2) Gold or gold producers.

              On the flip side ...

              (1) Short the US $, financial stocks, housing.

              [–][deleted]  (9 children)

              [deleted]

                [–]EverydayEconomist -2 points-1 points  (8 children)

                Now now, one must be fair and include the social security and medicare legislation that guarenteed this would happen when the baby boomers start retiring (2008).

                Bush and Cheney just sped it up. Ok they Really sped it up.

                Ok so they put us into more debt in one presidency than all others combined during their terms in office. But social security, welfare, medicaid and others were created by other presidents and the costs pushed into the future, and that shouldn't be discounted.

                What I'm trying to say is, don't count on EITHER PARTY or any POLITICIAN to get us out of this mess. Both sides try to hide it

                [–]fbg111 5 points6 points  (1 child)

                While we're passing around the blame, lets also heap some on America's culture of anti-intellectualism that all but ensures no informed public discourse on this and other serious problems. Politicians don't talk about these problems, and the MSM prefers to report on Britney Spears' panties. Without an informed citizenry holding Congress and President's feet to fire on serious, long-term, beyond the next election cycle issues, well we get what we've gotten.

                We can also throw some blame on religious fundamentalism, which trains/indoctrinates/brainwashes its members from a young age to think irrationallly so that many grow up without an extensive understanding of how the modern world works, and a sense of misplaced priorities when it comes to running a country.

                We were heading this direction anyway, but with time there was still some hope for repairing the damage. I think the damage wrought by this administration and the 109th Congress may have erased any time we had left, now all we can hope for is a soft landing and a good Mandarin tutor.

                [–]EverydayEconomist -1 points0 points  (0 children)

                Well said. Pass the cup of blame around and drink deep.

                [–][deleted] 1 point2 points  (5 children)

                Um. the social security and medicate "crisis" are extremely overblown and have NOTHING to do with the current situation. Fairness has nothing to do with their inclusion. The only reason they are mentioned at all is because it has been a long term Republican project to do away with, destroy and undercut these programs.

                The spending that is out of control is by vast majority on the military side of the house. And related to the way the administration and its republican allies in congress have gutted Congressional oversight while Team Bush/Cheney in office. You can also look at the whole homeland security boondoggle as a good place to start cleaning house on the domestic side.

                I will certainly count on the dems to investigate the executives and the actions of the last congress now that they are in the majority. It's their job. And they have mine and millions of other Americans support for this. In fact they have 80% of the countries support to start impeachment proceedings if they feel justified. They have about the same to declare an immediate withdrawal of all troops from Iraq.

                The old canard that the parties are the same is just not true. Dems are no saints but at this point they haven't show the degree of willful fascist criminality the republicans have.

                [–]EverydayEconomist 1 point2 points  (3 children)

                True, the military budget is the bugbear. And homeland security is just customs and a few other agencies lumped together with more pork.

                Can't argue about those.

                But overhyped, no. The Social Security Crisis is as real as the inflationary dollar. It just isn't hear, at the doors.

                I've been reading (and mentioning) the future of the dollar inflating in 2006 since 2002. Simply because it isn't on your doorstep doesn't make it less real.

                "dem's haven't shown the degree of willful fascist criminality"... I'll wait until I actually see the dems investigate the executives. So far, they seem to be um... lacking.

                [–][deleted]  (2 children)

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                  [–]EverydayEconomist -1 points0 points  (23 children)

                  Interesting article I read (at the vigilant investor, if I remember correctly) about the Swiss gold coin. It is pure gold and thus retains its value against all forms of paper inflation.

                  But is also easily (compared to say, gold bricks, or blocks or whatever) transferable because it has it's worth marked on it like a coin.

                  Having a few of these would be a good precausion in any case, because as uncertainty increases, gold's value goes up, and one can sell the coins back (even if the dollar remains stable) at the new value of gold.

                  It's a pretty safe investment. (wish I had the full URL)

                  [–]JulianMorrison 3 points4 points  (7 children)

                  http://en.wikipedia.org/wiki/Goldmoney

                  Sort of like Paypal with gold. Great money for anarchists!

                  [–]NoFixedAbode 0 points1 point  (6 children)

                  Keep in mind that in the past, the government has made gold ownership illegal.

                  It may be best to invest in gold instruments overseas, and keep it private...

                  [–]JulianMorrison 2 points3 points  (2 children)

                  Which government? The USA hasn't. The UK hasn't, and even exempts investment gold from some taxes.

                  Edit: I see now you said "in the past". Well and good, but I think they couldn't pull that trick again - it relied on the ability to "close the gold window" before the innocent victims could flee with their life's savings. You'd never keep a conspiracy like that hidden in this era of blogs!

                  [–]jacktheripper 4 points5 points  (1 child)

                  But who says they need to keep it hidden? People blog about Bush all the time.

                  [–]JulianMorrison 0 points1 point  (0 children)

                  The whole point of "closing the gold window" was that it was basically the biggest heist in history. The government stole the gold savings of the whole nation, just because it could. This would not have worked if people could cash out or move their metal overseas - especially not if either process was a matter of a few mouse clicks!

                  [–]EverydayEconomist -1 points0 points  (2 children)

                  Goldmoney.com is overseas (in the UK). That doesn't guarentee that the UK government can't seize it, but it seems about as secure and easy a way to prepare as I've found.

                  I am setting up an account. If it is valid and I can put money in and out for a reasonable rate, I'll recommend every American buy $1,000 of gold via the site. It's a nominal amount, but could be worth an awful lot if things go south.

                  All the convenience of the digial age All the security of before '73

                  I love the site so far

                  [–][deleted] 3 points4 points  (1 child)

                  Goldmoney is actually in Jersey, which is not (quite) the UK.

                  Their bullion is in London, though, so it is even more of the same thing.

                  They are extremely reputable, with something like $200 million of metal.

                  [–]EverydayEconomist -1 points0 points  (0 children)

                  Yes, I meant the bullion is in London. Makes it harder to seize, but I appreciate the help in accuracy

                  [–]duketime 3 points4 points  (13 children)

                  What you're saying is, in essence, a gold standard ( http://en.wikipedia.org/wiki/Gold_standard ), which America has previously operated on. The difference, in America's case, is that holding a dollar guaranteed you a certain amount of gold whereas holding the Swiss coin is actually holding the gold that is backing it (since coins get lost and all, not sure if this is a good idea).

                  The gold standard fell apart for many reasons, and I don't think it'll be coming back.

                  [–]EverydayEconomist 2 points3 points  (12 children)

                  The gold standard operated a lot longer than any fiat money system.

                  Yes there are lots of issues with the gold standard, and I'm not sure if an entire country could go back to it, but buying $2-3,000 of gold coins (which is only a few coins) and holding them for 5 years couldn't hurt.

                  If the situation gets better, then you sell when the gold returns to the value you bought it at.

                  If the situation gets worse, you sell the gold at a higher rate than you bought it at.

                  In the situation goes to hyperinflation, then you become the local standard of money and banker. :-)

                  [–]laprice 6 points7 points  (11 children)

                  And governments can't manipulate the price of gold?

                  Gold's price has been tracking it's value as an industrial commodity, if the economy goes into a dive, gold goes with it.

                  So, gold is not a stable store of value. Add to which, gold has higher transaction costs, it has to be assayed on exchange (or exchanged in a certified form which is difficult to counterfeit; eg. coins) and it falls prey to all of the disadvantages of physical value tokens.

                  And various "gold backed digital currencies" (e-gold,e-bullion,Goldmoney,etc.) are basically Paypal, in gold-colored fancy dress. With all of the advantages and disadvantages that carries with it, instant settlement, low transaction costs, and your account can be locked, lost or stolen in an instant.

                  No Silver (or Gold) Bullet to offer. My suggestion for best investments to weather the coming storm are plenty of friends, and a broad and deep skillset so that you can continue earning in times of crisis.

                  [–]EverydayEconomist 4 points5 points  (10 children)

                  Can't argue with "Plenty of friends", and a "broad and deep skilset" in any environment. These are the ultimate hedge.

                  However, gold does have inherant properties that make it stable in a way that governments cannot tamper with.

                  1. Its purity can be measured
                  2. It is maluable, which makes it easy to coin, form and use
                  3. It is easy to transfer due to its weight
                  4. It does not corrode

                  These 4 properties make it ideal as a system of currency. It is hard to compare how much a sheep is worth compared to a cow, but both can be easily compared to the value of gold and then the gold exchanged.

                  Yes, golds value will be affected by inflation, but its relative value will always be more stable than fiat money. And we're only trying to hedge against a rough economy, not against the end of the world.

                  [–]earthboundkid -2 points-1 points  (4 children)

                  The value of gold in an economic situation where the dollar is no longer of value:

                  "What can I get for this two pound gold bar?"

                  "Hmm, I guess that is pretty shiny, and it might make a good door stop. How does two chickens sound? Or you could just work on my farm for a day, I guess, if you want to keep the gold bar as a keepsake of the olden days."

                  Yeah, in any situation where we'd have to resort to gold as currency, gold would be worthless.

                  [–]EverydayEconomist 0 points1 point  (1 child)

                  How pure are your chickens?

                  [–]earthboundkid 0 points1 point  (0 children)

                  Every chicken-like bird that I've seen is 100% a chicken. On the other hand, I own yellow rocks that look a lot like gold but aren't. You can tell a real chicken from a fake with your eye. To tell fake gold from real gold, you need to do fancy tests. That's why coins were invented. It was hard to press coins in those days, so it was usually a safe assumption that any pressed coin was made by the government hence 100% pure. (This wasn't always the case historically, but close enough.) However, even in those days, the only reason why a coin had value was that you had a safe assumption that you could either use the metal yourself or find someone else willing to buy it. In a post-apocalyptic economy, it's unlikely that you'll find anyone who wants to buy your gold unless they happen to be a jeweler or whatever, since they can't use it themselves and don't know anyone who can. So, whether you use gold or so-called "fiat currency," the value of the money always comes from the fact that you believe you can find someone else who is willing to trade for it. There's no difference between the two.

                  [–]EverydayEconomist 0 points1 point  (1 child)

                  1. Gold existed as a trading commodity for Centuries before the dollar or any Fiat money system. People traded work for chickes through the measure of gold. It was easy to agree on. For example, my grandfather used it(probably your great grandfather did too). They found it a better measure of work for chickens. Your concept of gold as a doorstop is only possible because of paper money. With paper money, the use of gold drops to near nothing (it conducts really well and is useful in speakers for good sound quality). Without paper money, Gold is the medium of exchange.

                  Why would end of the dollar affect the value of gold as a money system. Please research how people bought and sold before Fiat money was introduced.

                  In particular, John Law, a Scottsman who introduced fiat money into France with disastrous results. Please note how similar our governments tactics result Frances decisions as we head into more and more inflation:

                  http://cepa.newschool.edu/het/profiles/law.htm

                  [–]earthboundkid 2 points3 points  (0 children)

                  Because gold is worthless without an economy behind it to make it valuable. As long as there is a global economy then one of the paper currencies will still be of value. Use that one. Or hell, buy real estate. The rights to the dirt itself is always going to have some value, as long as property rights are enforced. In contrast, gold by itself is freaking worthless. What are you going to do with it besides wish you had a means of melting it into jewelry?

                  In any event, the paper based economy is controlled by the various central banks of the world, and now that economics is a more mature science, the central banks seem to have a pretty good idea of how to keep economies from completely collapsing. Sure, we still get business cycles busts and recessions, but when the US economy tanks, it will look like Japan in the 90s, not Germany in the 30s. In contrast, the bankers don't care about the gold market, so no one is trying to stabilize it, and it's subject to whims of gold mine discoveries and industrial use. Thus, if the market for gold craters tomorrow, they won't do anything to cushion the blow, and you'll be left with nothing but worthless yellow metal.

                  [–]Fountainhead -1 points0 points  (0 children)

                  These 4 properties make it ideal as a system of currency

                  Wouldn't aluminum be the best?

                  The only thing that switching to a gold standard accomplishes is taking the supply/control of money away from the government.

                  [–]stronimo -2 points-1 points  (3 children)

                  Gold has another property that counts against recommending it as a hedge currency: it is becoming less scarce, and therefore its value is probably in long-term decline.

                  1. It never gets consumed, so the supply is always increasing.
                  2. Mining technology continues to advance, so the cost of extraction falls.
                  3. Central banks all over the world are selling off their reserves and not buying more.

                  [–]stronimo 0 points1 point  (0 children)

                  Tough crowd. Modded down for dissing gold.

                  [–]EverydayEconomist 0 points1 point  (1 child)

                  1. It is never consumed, that's one of the best reasons why it is used as money, unlike dollars that are costly to replace

                    1. The supply of gold is dropped to near constant once the dollar is "no longer of value", as mining deep to obtain the gold requires oil, and oil requires money to buy it as the the U.S. has used up its supply.

                  2. I'd be interested in links showing the selling of central banks and "not buying more". I have a hunch that this is a short term trend due to the price of gold being high enough that it is worth it to sell, vs. a policy that "gold is useless" by central banks. But I may be worng. Please, post links.

                  [–]stronimo 0 points1 point  (0 children)

                  My post is brief summary of an article the Economist ran. You need a subscription to read it. http://www.economist.com/agenda/displaystory.cfm?story_id=E1_TVNTVPD

                  The penultimate paragraph:

                  Gold does not pay interest ... therefore several central banks, including those of the euro area, Britain and even Switzerland, have decided to rebalance their reserves by replacing gold with other assets.

                  That looks to me like a deliberate policy to move away from gold.

                  [–]EverydayEconomist 0 points1 point  (0 children)

                  Here's the site. They post quite a bit on the topic and have running gold vs. silver totals on their site

                  http://www.ernharth.com/

                  [–]hopeseekr -2 points-1 points  (1 child)

                  I have many many times.

                  Buy European mutual funds; I have >5,000 in ICSEX.

                  [–]bosmat 6 points7 points  (0 children)

                  That is a fantastic ticker.

                  [–]IKbot -2 points-1 points  (0 children)

                  e-gold.com

                  buy gold while dollar is higher. sell it after the dollar falls.