Court,
I think something very, very important is happening... and we (myself included), just don't "get it". But it's happening.
Please try to follow my thoughts here... and I realize I'll be making generalizations but that's because I know you (and most others) already KNOW the detail behind the generalization...
Let's look at the signals over the past 6-8 months... The IMF warnings about USA imbalances, the USA level of unprecedented debt... the short, clipped announcements that China & other countries want to diversify their reserves... Iran's new use of the oil trading in Euros... lower attendance by Asian countries at our treasury auctions...
These news events are unprecedented. I can't really 'buy' the stalemate of the Bretton Woods II theory. I think the cards are shuffling over these months. The dollar & US debt has been sought (not shunned) throughout our lifetimes. Yet, these signals are a public cry from countries that hold USA currency & are watching the 'dollar tanking' fully reduce their reserve values. Quite unpleasant. As far as holding USA debt, they watch a boomer generation approach unrecognized liabilities that, when addressed, will absolutely affect the quality of the debt instruments they hold.
Now then... gold obviously shot too far too fast. Yet, gold is the very alternative to holding dollar reserves. When coupled with pristine currencies & soon-to-be sought (EURO) currency, then gold is a necessity. The climate to diversify reserves is the worse (in terms of gold affordability... or rising Euro... or rising quality currencies). What is a pool of countries to do??
Well now... months later... and after intense G8 (or is it the G9?) meetings, we suddenly see gold tank. We see the Euro drop against the dollar. We see the dollar rising. We see copper & silver dropping. Why are we seeing the very alternatives to the dollar tanking j-u-s-t when the countries who have high dollar reserves need them most? Could those countries have enough clout by banding together with tandem lock-step interest rate hikes (see the past 2-3 weeks) under the guise of "inflation" fighting to lower commodity prices? To band together to intervene & make the dollar rise (thus giving more punch to the dollars they hold to... ummm.. BUY the cheapened commodity they need to replace the dollar reserves)? Are we witnessing the shift of global reserves?
There is no fundamental change in demand overnight. Could there be (and this is almost outlandish) some agreement that if they keep lending, we'll allow tanking of commodities & reserve alternatives? And prop the dollar while all this happens? Somewhere, some place, there has got to be a thinktank that has not only outlandish possibilites like this, but which might also stumble on the truth. We never find out the truth until history books are written. Whether or not this will affect you & I today (via portfolios, etc) doesn't really matter. What really, REALLY matters is how this reserve "switching out" and dollar dumping will affect us in the future... our families, our country.
I am not a conspiracy nut (as you know I dismiss all of that bunk). But something important is happening... and I think we might be missing the REAL movements that are going on. Those movements, and they seem to be successful, are the first steps in countries making moves to diversify from America. This is important... especially if only "half" of what I'm wondering is right... or even 'partially' right. Every country that was ever strong absolutely 'weakened' economically in times of war. Many never regained former status once the war was over. This is not to comment on whether the war is right or wrong, but rather what it does to the economy. Maybe that is precisely what countries see happening to us: waging & financing a totally 'borrowed' war, mounting debts to unsustainable levels, personal spending abound, and.. all of this... in the years directly before the largest cash drain in the history of the country is about to be faced. A time when we should be saving, not spending.
Gaaads... it sometimes fully clouds my head... I am absolutely sure that "reserve quality upgrade" is behind most of the recent moves (tandem interest rate hikes/ commodity drops/ dollar diversification). But there is a picture out there that I just "don't get".... and might stay confused at times... but I believe this is the most important economic transition period our country has faced in all of its history.
Too much for a Tuesday, no? I think so too... so I'll close. Great talkin' with you, even if it's a "one way" forum! Can't wait for you to tell me that I need to take some prozac... but.. alas.. my health insurance won't cover it!! LOL!
AI
