Monday, June 13, 2011

Gold v Paper Politicians

The USA is reeling under the weight of nearly $60 trillion of debt and unfunded obligations. There is no fiscal policy on this planet that can fund these obligations.

The maths is not credible. Printing money is the only answer remaining. The US Government wants results, quick, and will pass the buck to the federal reserve to be the fall-guy. Things will look up for a while, just long enough to get re-elected in 2012.

New Zealand isn't much better. The politicians are unwilling to tackle the debt. In fact, the good old National party is now on the debt grab while the NZ dollar is on a high. Pay down debt, nope, get some more, yes sirree. Like the power junkies they are, they look to gain votes, not credibility.

It has been said that the way societies organise themselves go from chaos to autocratic rule to democracy and back to chaos. Guess where the West is in that cycle? Short term thinking is setting us up for a breakdown in the way we govern ourselves.

Today, this silly writer gave into temptation and went to a Starbucks on the Harbour Front here in Singapore. Silly, because the coffee was terrifyingly bad. But the newspaper was interesting. It had an article outlining where people could invest money.

The average Singaporean racks up large savings and debt in order to house themselves and pay for their children's education. No wonder the birth rate here is 1.16. It is just too darn expensive to have this lifestyle and kids.

The investment advice was to buy bonds (corporate), Aussie dollars (stay out of US dollars), property (ouch) and term deposits (to keep cash handy).

OK, so most of this is paper backed by balance sheets that look good. But in this business climate, those balance sheets must be very suspect. And term deposits? If you are happy with negative interest rates, go for it.

Commodities got a mention as 'an alternative' investment. Gold and silver, well you could hear the wind blowing and the tumble-weed rolling. Not a mention. So the best this rich and prosperous nation can advise is to buy paper.

No gold or silver.

Then again, perhaps the gold and silver community do actually belong to the "tin-hat, bible thumping, anti-government, irrational plebs club" after all? Have they been duped by the allure of the yellow stuff. Do they get a sort of salivating fever coming over them when gold is mentioned?

Not sure, hope not. But when you look at this prosperous island nation of 4 million people, and see that it is basically a service provider to the region, then the modern veneer of wealth looks decidedly shaky.

In the height of the GFC in 2008, the German Chancellor called up the head of Duestche Bank and pleaded with him to buy out a German bank that was headed for insolvency. He did, and became a hero, and all was 'well'. What we didn't know was that Ms Merkel was worried that if the Asian markets had opened before the crisis had been averted, Asia would have panicked. If that had happened, Singapore and the rest of Asia could now look decidely different.

Politicians are hopeless people drugged on power at any cost. Are we headed for chaos because of this democratic expediency. As individuals, should we bury our heads in the sand and just buy paper?

Where's that tin-hat...

Gold in New Zealand dollars: $1865.46 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $44.08 per oz
Previous all time high: $48.58
per oz

Articles of interest:

The Von NotHaus’ Question
See article here
The New York Sun


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