Arab central banks move assets out of dollar

[Osborn F Enready]

Bishop said: also, this story highlights how the country's economy is vulnerable to economic warfare. the more deficits we run, the greater our debt increases, the greater our vulnerability to economic warfare becomes.. and right now, higher interest rates are luring in foreign surplus cash like light to mosquitos.

I say:
Ain't that the truth.

I am curious to see what many countries will do when hearing about this.

There are many large countries who might play along just to watch the monster fall on its face, and many little countries have probably been dreaming about this situation for years. For the first time, I think many nations are going to feel as if they have yet another, high card in the global debate and power structure.

Chavez, Morales? Russia? China? There is a lot of laundry out on the line right now, let's just hope we can bring most of it in before the storm hits, because as of now, this could be just a minor blip on the radar, but it is bad weather season and the skies are turning colors and the wind is shifting erraticly.

Guess we can watch the weather, and prepare ourselves for the ride ahead whatever it may be.

My bet is the government will use Katrina as a guide, and prepare for this as they did for that.

[Keith Hamburger]

Quote by: Osborn F Enready The writing has been on the wall since 1913, and every year since has been creating a bigger hold to fall into. Hope you all have parachutes.....

I have silver, firearms, fully paid for vehicles and access to 640 acres in Southwestern Oklahoma. The land is owned by the family and I am certain I wouldn't get arguments about using 10 acres to support my immediate family.

My parachute is in place.

Thank you for your concern, Os.

Keith

[SteveA]

In many ways the damage is already being done, from retirement accounts that no longer have the expected buying power to overpriced and unaffordable resources, though the longer this continues, the less credit and faith that will be retained and in the currency and if/when people realize the IOUs are worth nothing more than the paper or plastic they're printed on and decide to minimize the damage done by accepting more of them, then the buying power of the dollar will quickly drop even more with and a race to the bottom ensues with whoever is willing to be one of the last people holding onto the paper/hot potatoe losing. Moving investments into more tangible forms, that aren't subject to confiscation, taxation or other forms of theft or at the mercy of legal commitments aren't bad ideas. If you can find one that gives interest to boot, hang on to it because you're either a lucky (wo)man or likely already a skilled investor.

[bishop]

that presumes that we will return to a gold standard if there is a collapse.. i'm not entirely certain that that will happen. plus, if there was a crisis, i'm not sure how willing people will be to accept gold for goods/services..

those are big assumptions, no matter which side of the fence you sit on.. gold is only a truly worthwhile investment IF you assume that we will return to gold in the event of a currency crash.. (and if that were to occur - i can see the elite buying up all the gold so that the average joe can't afford any for themselves.)

[SteveA]

Quote by: bishop that presumes that we will return to a gold standard if there is a collapse.. i'm not entirely certain that that will happen. plus, if there was a crisis, i'm not sure how willing people will be to accept gold for goods/services.. those are big assumptions, no matter which side of the fence you sit on.. gold is only a truly worthwhile investment IF you assume that we will return to gold in the event of a currency crash.. (and if that were to occur - i can see the elite buying up all the gold so that the average joe can't afford any for themselves.)

Gold's simply an obvious one, if you're still rather young, an education is a great way to rather securely invest resource and you're mistaken that gold is only a worthwhile investment if it becomes a currency.

[rmnunez]

Osborn, I don't think antiquity of forecasts is a compelling point in economics, reference to analyses from 1993, or worse, 1913, isn't as persuasive as consideration of more current conditions.

The impression I get is that some feel US foreign policy is so lousy, something ought to be done. A military confrontation is inconceivable since the US is unexcelled in this field. The US seems fairly impervious to diplomatic pressure which merely has eroded somewhat their preeminence in international relations. Naturally, critical lefties (and those who also think US foreign policy is lousy but maintain their non-leftish labels) consider economics to be the tool to deliver the united statians their deserved comeuppance.

The Euro was the means to accomplish this, divest international holdings in dollars, convert all foreign reserves into Euros, peg commodities in Euros, this way (according to their -sometimes ancient- forecasts) the US would succumb. These people are calculating the UAE is "looking into" tangibly expressing their outrage over united statian Arabophobia that nixed a multi-billion dollar MNC transaction, by converting 10% of their foreign holdings into Euros.

Two things; perspectives on foreign policy and economics should not be mixed, and the UAE is wisely counseled by shrewd accountants who have determined the lost profit and enhanced risk in the transaction they are "looking into" suggests 10% is the max they'll chance.

[bishop]

Quote by: SteveA Gold's simply an obvious one, if you're still rather young, an education is a great way to rather securely invest resource and you're mistaken that gold is only a worthwhile investment if it becomes a currency.

again, that assumes that people would accept gold to buy goods/services... i'm not sure that in the event of a currency crash, that i can bring a couple nuggets of gold over to the local food guy in exchange for some of his food.. moreover, i'm not sure that local food guy is going to be able to buy a store full of food with a couple nuggets of gold either - and he definitely wouldn't be able to do so with fiat.

purely as an investment, gold and any other commodity, is frightfully volatile.. if someone's going to invest in gold, it certainly shouldn't occupy any more than 25% of a portfolio imo - and it certainly should not be a long-term investment.. if you bought some gold in 1979, the spot price would be roughly the same as it is today - and when you apply inflation to the analysis, you've actually lost quite a bit of money... if you bought into the s&p 500 (an equity), by contrast, you would have made a shit ton of money, even after inflation..

[rmnunez]

You might look into Mexican silver, the famous "centenarios" sterling silver coins regularly sold by the Mexican treasury. In various Latin American economics summits they've been discussing the currency as a good international savings vehicle, revalorating, easily recognized, readily convertible and accesible to the poor.

[Keith Hamburger]

Quote by: bishop that presumes that we will return to a gold standard if there is a collapse.. i'm not entirely certain that that will happen. plus, if there was a crisis, i'm not sure how willing people will be to accept gold for goods/services.. those are big assumptions, no matter which side of the fence you sit on.. gold is only a truly worthwhile investment IF you assume that we will return to gold in the event of a currency crash.. (and if that were to occur - i can see the elite buying up all the gold so that the average joe can't afford any for themselves.)

That's where the land comes in. The silver (or gold, as the case may be) is for luxuries when such become available. There is enough rain and a long enough growing season in Oklahoma to support a family on 10 acres, easily. Living in Colorado it's been a long time since I've grown a garden (there's a problem with precipitation and a short growing season here) but I think I can still do it.

Keith

[bishop]

you could make people sell you nuggets of gold so they can live on those 10 acres, tend the land and become servants of the hamburger dynasty.

heh.. sorry..

i wonder if imminent domain could be imposed during a time like that.. especially as millions in congested/urban areas are in deep poverty and starving... hell, if i were in that kind of situation, i'd probably support the feds taking over your land if that meant i could avoid starving to death. (they probably wouldn't do such a thing for just 10 acres though.)

(i'm a fan of gardening myself - even though i don't own any land.)

[rmnunez]

It is amusing to read these dire predictions based on hypotheses applying ancient economic postulates read into tenous suggestions of concerted applications of economic sanctions against the US. It seems hamburger and bishop anticipate a reversion to the Middle Ages with the this time imminent economic crash to result when the whole world gets into the game and starts switching to Euros. Buy some "centenarios".

[SteveA]

Quote by: bishop again, that assumes that people would accept gold to buy goods/services... i'm not sure that in the event of a currency crash, that i can bring a couple nuggets of gold over to the local food guy in exchange for some of his food.. moreover, i'm not sure that local food guy is going to be able to buy a store full of food with a couple nuggets of gold either - and he definitely wouldn't be able to do so with fiat.

First, I never even mentioned gold. Second, you're ignoring that gold is a more liquid asset than most investments. You assume gold is only valuable as a currency. Obviously it's better than dollars at retaining value but you're missing the fact that gold can also be used as an investment.

Take a look at what I said and then see if you aren't simply replying to your own assumptions instead of things I've said.

"In many ways the damage is already being done, from retirement accounts that no longer have the expected buying power to overpriced and unaffordable resources, though the longer this continues, the less credit and faith that will be retained and in the currency and if/when people realize the IOUs are worth nothing more than the paper or plastic they're printed on and decide to minimize the damage done by accepting more of them, then the buying power of the dollar will quickly drop even more with and a race to the bottom ensues with whoever is willing to be one of the last people holding onto the paper/hot potatoe losing. Moving investments into more tangible forms, that aren't subject to confiscation, taxation or other forms of theft or at the mercy of legal commitments aren't bad ideas. If you can find one that gives interest to boot, hang on to it because you're either a lucky (wo)man or likely already a skilled investor."

Now you obviously recognize gold is a better investment than dollars, and of course I'd agree but I don't generally say things idly and I was providing ideas even potentially better than gold, assuming people can find those better investments. The specific characterists I mentioned are:

1) Not subject to confiscation or theft
2) Not taxable
3) Not subject to the whims of legal obligations
4) Interest bareing investments are even better.

purely as an investment, gold and any other commodity, is frightfully volatile..

No, dollars are much more volatile and have a much greater downside than most any commodity.

if someone's going to invest in gold, it certainly shouldn't occupy any more than 25% of a portfolio imo - and it certainly should not be a long-term investment.. if you bought some gold in 1979, the spot price would be roughly the same as it is today - and when you apply inflation to the analysis, you've actually lost quite a bit of money... if you bought into the s&p 500 (an equity), by contrast, you would have made a shit ton of money, even after inflation..

If you'd bought S&P 500 in mid 2000, you'd still be down (~ -15%) while gold would have increased by almost double (~+100%) in that period of time. On top of this your exposure to risk is lower with gold.

Did I ever deny stocks could be a decent investment? No, and I mentioned for younger people an education might not be a bad investment but let's go back and compare all 3 of these and add housing property and dollars to the mix also:

1) Not subject to confiscation or theft

a) S&P 500 - good
b) gold - better
c) education - best
d) housing - good
e) dollars - good

2) Not taxable

a) S&P 500 - not too good
b) gold - ok
c) education - varies
d) housing - not very good
d) dollars - ok

3) Not subject to the whims of legal obligations

a) S&P 500 - not good
b) gold - good
c) education - better
d) housing - decent
e) dollars - decent

4) Interest bareing investments are even better.

a) S&P 500 - good
b) gold - not good
c) education - depends on usefulness
d) housing - good
e) dollars - very poor

So I hope this clears up your misconceptions. Dollars are simply one of the worst ways to invest money. If you're simply interested in protecting value, gold ranks high. If you want to earn interest, then you trade some risk and exposure in other vehicles.

[bishop]

Quote by: steve First, I never even mentioned gold. Second, you're ignoring that gold is a more liquid asset than most investments. You assume gold is only valuable as a currency. Obviously it's better than dollars at retaining value but you're missing the fact that gold can also be used as an investment. Take a look at what I said and then see if you aren't simply replying to your own assumptions instead of things I've said.

doesn't matter if you mentioned gold. you are a gold bug, aren't you? heh, i think we've debated enough to be able to make those kinds of assumptions about each other.

as far as liquidity goes... yeah, it's more liquid than some investments, but i definitely wouldn't say most. i can get cash out of my equities (bonds, options, etc.) extremely fast - a couple mouse clicks and i have the funds transferred to my bank account.

gold is an investment for less risk-averse people.. you can win big with gold if your timing is right - and you can likewise lose big if your timing is wrong.. and, there is no trick to timing the market, so i would never presume to have the "special juice" when it comes to knowing when to buy/short/sell. since gold prices are more volatile than less risky investments like index funds, you have to be ready and willing to bet big and potentially lose big.

and let's not play games when it comes to market timing.. most investors are long-term investors (adherent to CAPM) who didn't just plunk their money down into the market in 2000... as a long-term investment, gold gives you far lower returns than the s&p 500..

in fact, i dug up the historical prices for each and looked at their returns for periods of 10 years a piece.

1950-1960
gold: -9.3%
s&p: 226.16%

1960-1970
gold: 3.01%
s&p: 52.89%

1970-1980
gold: 1605.32%
s&p: 34.27%

1980-1990
gold: -33.91%
s&p: 188.26%

1990-2000
gold: -34.24%
s&p: 323.74%



obviously i could've hand-picked different years and the numbers would've been different, but the point is that an investor stands a better chance with equities than gold...

investing in currencies is another story.. i suppose i misspoke when i was talking about currency - i did not mean forex (i simply view my highly liquid assets as easily convertible into cash). however, the forex market is pretty much equal to commodities in terms of volatility. and when you have such volatile markets, you must be a short-term speculator rather than a long-term investor.. as my numbers show, you don't stand a good chance of profiting from gold in the long-run.

gold may have some upside left, who really knows.. but what i do know is that it's one risky as all hell gamble right now.

[Rave7pt0]

I had a thought... what if the GOP know it'll lose the next presidential election since they screwed the pooch during this term (and last)?

Well, during any presidency you'll hear one person say "Wow, [insert situation] is going [great/awfully]! President [name] sure is doing a [rocking/shitty] job." And then you'll hear another person respond "It's not our president's doing, it's the previous president's doing!"

Well, you hear that, but really when people think about current affairs they blame it all the current president, no matter what it is. Clinton was great because he made the economy boom. Not like it was cyclical and the internet took off during that time.

So I'm a GOP strategist and I'm fairly sure I'm going to lose in 2008 to the Dems... I think it'd be a great idea to really fuck things up in the country before 08 then leave the Dems to clean up the mess. In the process they will be villified in the media, and by 2012, people will be ready for the GOP come in and "save" them from the mess the Dems supposedly made.

Plausible?

[Rainbow]

Quote by: bishop gold is an investment for less risk-averse people.. you can win big with gold if your timing is right - and you can likewise lose big if your timing is wrong.. 1970-1980 gold: 1605.32% s&p: 34.27%

Off Topic
It seems (RIP) J.Kennedy-Onassis belonged to those "lucky" ones, by investing in gold.
She made (at least) tens of millions over night, just being that "excellent-timing" investor.
Does it mean, she was a smart investor ?
No.
She had known the real trends and/or quotes, prior allocating her investment in gold.

How was that possible ?
Everything is possible, especially on the top political levels, supported by military and financial institutions, and U.S. is not the exception.
Open up a world map, and chose a country. That pattern applies to that country as well, with lesser-or-greater impact and/or accuracy.

That is yet another example how Politics works. Money, and nothing but money.
Mankind has developed a "Coin" to become its slave.

On Topic
I remember your post on U.S. economy and some solutions, bishop
I agree (and I uphold my postition) with you :
- U.S. needs to undergo a transformation, from "service"-taker to "product"-maker
It may take some quite period of time.

Why U.S. should bother with those Middle-East region's "intellectualists" ?
They were morons, they are morons and they will stay morons. For them, religious values are more important than their own life, existance, ect. Plain simpletons, bluntheads.
They have forgotten that God has equipped them with brain, to be used in order to survive.
Meanwhile : support Israel, in order to watch those guys

It was a mistake to make them aware what the oil really means. Now, we all struggle, while the whole Europe is becoming more dependant on the Middle-East region's oil, then ever, and nothing indicates that process seem to be reversed anytime soon, at all.

P.S.
Would not be a "bad idea" to clean a field, for good ? and start it all over once again ?
Sometimes, I think it is "the best solution".

[SteveA]

Bishop, I had a nice long juicy post going ... and then Netscape crashed on me.

I can only try to give you information (and I'm not going to bother retyping the whole thing ... it's your money, do what you want with it)

I'll just summarize. Markets are more volatile than gold, and most of my investments have been in stocks also, as they average better returns. But gold is less volatile and better when instabilities are around (especially wars/political ones) You have to use your own judgement. If we look at the long term, the DOW since 1900 has averaged ~5.2%/year whereas gold has averaged ~3.2%/year. In reality the dollar is making these both look like better investments than they truly are. If we ignore the dollar (as the Arab banks are beginning to) the DOW gives you about 2%/year interest and gold simply retains your value with the dollar losing you 3.2%/year. Actually, the 2% return of the DOW is rather sad ... I'm actually amazed, and bummed, at how low this is. Not only that but when your investments are simply contractual IOUs or legal obligations, you continually run a risk of simply being defaulted or have the assets stolen even legally. So though you might gain more, you still have greater risk investing in markets.

During the great depression gold didn't crash, the stocks did. During the 70s it wasn't gold that took a dive. Gold remains rather stable in value, whereas paper assets can provide a better return but are more volatile. I don't know how many other such forms of paper wealth have been destroyed almost overnight. The reason why this is so sad to me is because it discourages people from investing and saving. We've got a negative savings rate in the U.S. now for the first time in history! The banks are like locusts eatting the fields and so few people want to plant anything anymore. This hurts us all in the long run. The markets aren't safe from this either if we have problems. Gold is the best way to retain some value if conditions are bad. If the weather appears to clear, go back out and start planting investments that give a return. Though you said timing markets is hard, it's not that hard to know when wars or international conflicts are occuring. The issue though is largely to act early. You can also avoid needing to time anything by not putting all your eggs in the market basket. At least it seems we both agree that dollars are not good investments.

[Protostar]

Not trying to derail the thread, but use Opera Steve. Netscape blows.

[SteveA]

Let's put the DOW into a better perspective DOW/gold instead of DOW/dollars.





Let's look at the price of oil/gold instead of oil/dollars:



The point is that gold is a much better measure of value and it's easier to judge the price of things versus gold than it is a dollar. Gold is basically the real currency the world uses whereas dollars are the fiat currency that have little limit to the low side. Markets can earn you interest but if you want to hedge against bad times, don't use dollars to do it.

This is why gold makes for a better currency and monetary system than dollars because it retains its value better than dollars. For example, did the cost of corn, cotton, natural gas, orange juice etc. go up over the last 50 years? Most people would say yes, but that's a bit naive. When they say the cost went up, they're thinking of prices in terms of dollars. When you compare them to each other or gold, you'll find prices never really change much ... a pound of flour is still almost as valuable as it was 50 years ago and that the value of a cup of coffee relative to it hasn't change much either, nor would the amount of gold or silver exchanged for them have varied much either etc. So the real issue is using an etherial rather intangible unit of value - the dollar in making these comparisons.

[bishop]

heh.. all the confusion's gone, finaly. you should've just said that that gold is a good hedging vehicle in the first place. no disagreement here.

at the end of the day, any investment can either make you a lot of money or cause you to lose a lot of money.. i'm sure there are some poor fools buying gold in 1980, only to see that investment fall through the floor.

and then you have your investment horizon and market timing (which is impossible to accurately estimate).. if you don't care about the ups and downs that happen during the year (someone ascribing to the CAPM theory), then it seems to me that equities are the best choice over gold.. if you have a shorter horizon, anywhere from several weeks to several months, then equities, gold, bonds and currencies all become viable investments.. you can make a lot of money on any of them, trading on short-term volatility.. you can get the biggest returns and biggest losses from the most volatile vehicles - gold and currencies..

so, yeah, i would agree with you that gold is a viable investment - although i would reject the notion that it's a viable long-term investment... i tend to prefer reversing my position on an equity when i think things are going to be bad. i don't particularly believe in hedging being realistic for a small investor, so instead, i continuously update my trailing stop orders to make sure that i don't get blind-sided.. if i don't want to touch any equities, then i'll move into a high yield corporate bond that's close to maturity (i pick up the last coupon and have the opportunity to buy back into the equity market)..

everybody has their own investment style of course. mine's been working very well for me for the past couple years. i also think your comments may differ from some others in that you aren't advocating gold from a doomsday perspective.. personally, i am not completely convinced that there will be a doomsday scenario - but i understand that it is possible. should such a scenario occur, i don't envision people being able to do much of anything with their nuggets of gold. sure, some people would accept them, but since our entire distribution system has divorced itself from gold, the gold bugs' assertions of gold's supremacy are a little over the top.


feh.. i just want to see some balanced budgets, so interest rates and inflation can drop - and so that equities can get some stable growth. trying to make enough to comfortably retire when i'm unsure whether/not social security/medicare will be there for me.

[Osborn F Enready]

I am not a "gold-bug" then I guess.

I simply see it as the only, next logical choice.