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Gold (The Currency of Last Resort)


As the price of Gold topped the $1,900 mark over the last couple of weeks ( a surge the metal made from around the 1500$ level) , the free market is sending the signal that gold is increasingly becoming the currency of last resort. With debt-default woes surrounding the euro-zone and currency devaluation occurring around the world, it seems that this trend will likely continue for a long time to come. One prominent economist, Peter Schift, believes that it is the fiscal and spending problems of the United States that are bring down other nations around the world. He argues that America’s largest export is its inflation–which exists in the form of printing U.S. dollars to pay for goods and services produced by China and other emerging markets. I must say that I completely agree with Mr. Schift on this point. The plain facts are that the biggest export from the United States is inflation. Somehow our country is able to print money backed by nothing (except a strong military) and use that money to pay for valuable resources and services. Let us assume that somehow the United States was able to jump-start our “economic recovery” tommrow. One must keep inmind that any economic recovery can only follow from an economic restructuring–the kind of restructuring that would require many companies going bankrupt, liquidating bad debt, and restructuring assets. This seems very unlikely to occur until U.S. political leaders are faced with a day of reckoning near the edge of  social and finnancial distructon. Untill then expect the markets to experience high volitility and dramatic swings while our country rides perhaps the most violent finnancial storm

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