Monday, April 18, 2011

Tipping Point

Gold in New Zealand dollars: $1862.73 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $54.08 per oz
Previous all time high: $48.58
per oz
When anything gets too wound up, it is in danger of snapping. When too many forces push something to the edge, it will take just a little poke and it will fall.

The straw that breaks the camel's back.

North Africa and parts of the Middle-East are now in turmoil. Libya, Algeria, Tunisia, Syria, Saudi Arabia, Bahrain and Egypt have all experienced the tipping points for their countries. Some say this all started with a man setting himself alight in Algeria. From there, well, the rest is history.

What of the markets in general though. Since the crash in September 2008, those in charge of the economies around the world have attempted to allay the effects of the huge debt bubble created ,arguably, since President Nixon floated the US dollar in 1971.

But the problem hasn't gone away. The can has been kicked down the road. The ostrich has put his head in the sand. The debt still exists; and it's larger; much larger.

Under President Obama's reign, the US debt has increased by more than under all the other President's before him. First it was private debt, now it's public and government debt that is going parabolic. When this happens, we generally print money. Printing may be happening here in New Zealand too (I think this is arguable from figures I recently obtained from the NZDMO and the RBNZ; but that is for another day). Here's our debt clock. It is not good reading.

What will be the tipping point. I don't know, but what I do know is that it could be something we haven't thought of. Note this story out of The University of Texas. This fund isn't buying gold for investment purposes, it is buying gold because they can see the US dollar losing value fast. They are protecting their staff retirement savings from devaluing.

Could this small act be a tipping point ? Confidence suddenly about the wane?
Inflation in New Zealand is reported, just today, to be around 5%. Will this be a tipping point for us? I doubt it. But where might it come from? Another disaster? Heaven forbid. Anger at food prices? Perhaps.

When the tipping point happens, then people lose confidence in the dollar. They rush to exchange this paper with things that hold value. It's happening around the world in small pockets, but it's gathering steam. Here's what the people of Belarus are doing. Exchanging their roubles for gold as fast as possible.

Is the tipping point closer? I believe so.


Articles of interest:

Belarus Central Bank halts gold sales

See article here
West India

Who will save America from drowning in debt?

See article here
The Telegraph

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