Gold and Generals

Folks,

Within days of me writing about generals and neocons and free trade, the news is
full of ex-
generals calling for Rumsfeld's scalp. I have such a firm grasp of the obvious!

Since I am on a roll, let me point out a heads-up on trade and the dollar. This
article is a
good backgrounder on the situation...

http://tinyurl.com/hh8uq

That a 'disaster" is coming is clear, but I'd add a small and large point. The
large point is
there is no real problem of "all those dollars coming back to USA" and ruining
our economy,
which normally would be the case. But the USA has changed its currency 3 or 4
times in the
last ten years (check out the new, new $10 bill) and if there is flight from the
dollar trying to
sell it, the USA will simply declare all those bills outside USA no longer legal
tender, issue a
completely redesigned currency and then enjoy tremendous control as they pick
and choose
what bills (well, whose bills) they will honor. The second that happens, no
bank in the world
will accept US dollars, effectively repudiating any debts intrinsic to the
dollar bill that
individual overseas happens to be holding. In this scenario the US economy is
fine, but
forget about travelling overseas when the US dollar buys practically nothing. I
am not
predicting an outcome here, I am just saying this article does not take that
possibility into
account. Yes, those dollars may try to come back, and if they did it would be a
disaster, but
we can stop them from coming back, rather easily. It just creates a different
set of problems
the analyst does not consider.

The smaller point is many traders have been investing in gold, in the form of
what is called
bullion, or gold coins like the canadian maple leaf, the US Eagle or the
standard, the
Krugerrand. The analyst in the article above rightly downplays the chances of
the US govt
seizing all citizens' gold as they have done in past monetary crises, but it
might happen. If
you read the enabling legislation from the past, there is an exception made for
people
involved in international trade, they can have gold for trade. (The russians
re-introduced a
gold coin for int'l trade a few years back, and an alliance of moslem countries
are working on
a re-introduction of the gold dinar).

Since gold is shooting up in value (gold actually merely holds its value, the
real event is the
price of gold is registering the inflation of the dollar precisely), and a
monetary crisis of some
sort is coming, then the sooner you start your businesses and invest the
proceeds back into
gold to trade further, the sooner you proof you assets against the coming winds.

I am not making any predictions here, just my thinking. In the next few weeks
I'll be talking
to my suppliers about being paid in gold. I'll tell you what they say.

John

Bookmark this post --- Email this post