On Wednesday, December 3, 2003, at 11:12 PM, Sidd wrote:
Here's an interesting observation:
...
Thus, I have been MUCH better off keeping my money in a NZ bank at an interest rate of 6.5% than I would have been if I had kept it in gold.
Interesting. You mentioned USD/AU and USD/NZD, but do you have a bottom line figure on NZD/AU? I mean, how much has the price of gold in NZD dropped over the last two years?
You Americans must be really pissed at how your currency is being destroyed!
Two things happening in the US:
1. Falling dollar 2. Rampant protectionism, i.e. punitive tariffs on imports
Both deliberately designed to prop up American businesses who can't compete on the world scene but have plenty of lobbying power in Washington.
We Americans will be paying a lot more for steel, textiles, catfish, computer chips -- you name it. If we buy from American companies we pay high local prices. If we buy from Europe, China, Vietnam, South Korea, etc. we pay high tariffs and high foreign exchange.
Bush hopes to smell like a rose by November, with low unemployment figures, higher American corporate profits, and endorsements from labor unions. Everything will cost more, but shoppers grumbling about the price of cars and fish sticks, or invisibly paying $100 more for a computer than they otherwise would have, are not going to trace that back to Bush & Co. in numbers that matter. Family funds will just sort of drain down a bit "for no reason," and everyone will vaguely wonder why their "take home pay" (a disgusting term meaning the 40% of their earnings they're allowed to keep) doesn't seem to go as far as it used to.
But no Sidd, I don't think many Americans will be pissed about it because they don't have much of a clue in the first place. Those who have a clue might take action like buying gold or NZD, and maybe this can generate enough price action to get clueless Americans to jump on that bandwagon -- though most of them will be too late. The path of least resistance for most of them is still stock and bond mutual funds. Gold and currency investment options are more exotic and harder to come by for average investors, and also much less publicized and even deliberately downplayed by financial advisors, CNBC, etc.
A friend of mine who's been in the hedge fund industry for quite a while has started a Forex currency fund and I think he's right on the money so to speak. The other day I was talking with him about gold and we got to thinking that he should include gold in his fund as "just another currency." There may come a day when ALL national fiat currencies are dropping relative to gold. Any currency fund which merely chases the relative squiggles between Euro, USD, NZD, etc. will be chasing those squiggles straight down the tubes in terms of actual purchasing power. So I think AU ought to be in his fund, though right now the parent trading system under which his fund is organized does not accommodate such a barbaric relic. But my friend said he might call them up and suggest that they include AU in their system somehow.
Or maybe he could find a way to include AU "on the side," as an adjunct to the normal currency trading in the parent trading system, though it would complicate the accounting quite a bit.
-- Patrick
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