Question:
As the US Dollar starts to unwind and loose intrinsic value compared to all other currencies is it still reasonable to claim shock at "Record" high values of Gold and Oil if these prices are in US Dollars?
Even if the value of Gold or Oil didn’t change over the last 12 months it would have appeared to have risen being based on US Dollar price? right?
Why the Euro is Garbage and Only Gold is Absolute
Posted by Dan Denning on Nov 16th, 2007
How about the gold market? Nature’s currency, gold, fell over US$27 in New York trading and is back under US$800 at US$787.30. Uh oh. What gives?
Another point we made last night is to underscore the fundamental structural change in the currency markets. The US dollar has fallen…and it cannot get up. There will be rallies. But even if the dollar rallies against the euro, so what?
The euro is also garbage, we pointed out. It’s simply another currency not backed by anything tangible. It’s risen by virtue of the fact that it is not the US dollar. But it too, is un-backed paper liability. And it’s not even backed by a real country! It’s backed by 12 member nations whose various economic fortunes may one day force them to abandon the common currency in order to set interest rates that are more appropriate than those set in Brussels. Europe has a North-South divide.
But back to gold. In a world of paper money relativity, gold is a physical absolute. That is why people have been treating it as money for thousands of years. That alone makes it compelling. But as we said, the bear market in the US dollar is a terminal bear market.
The US government will either have to greatly devalue the currency to pay off its debts, or default on those debts. Neither is good for confidence in the currency. In the meantime, things priced in dollars (commodities) will continue to go up as the supply of dollars increases faster than the supply of tangible goods.
Dan Denning
The Daily Reckoning Australia
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