Friday, August 5, 2011

Patterns Leading to War?

Gold is at an all time high in New Zealand dollars (by my figures anyway) at $1974.37 per ounce. The New Zealand dollar has lost 5 cents against the US dollar in two days. Mainly on the back of the Japanese Central Bank intervening in their currency market.

Today, we see the latest round of asset selling worldwide. Gold is holding it's own, down US$20.00 per ounce so far, but paper markets are tanking.

The debt situation in Europe and the US is to blame. Over the last few weeks, a cadre of self-important Euro Leaders leant their precious cudos in an attempt to rally European money markets. But no one was listening. Mr Market saw through all the bravado and has now thumbed it's collective nose.

The Dow down over 500 points today. Ouch. The Nasdaq down 5%, S&P 4.8%, FTSE 3.5% and the DAX 4%. You can smell the fear and panic. Not pretty. It reminds one of the huge downward spiral in 2009. People are cashing up and sitting on it (and even buying US Teasury notes would you believe), waiting for the market to settle and give them direction.

Where is this leading? GDP is falling in most developed countries. Growth is slowing and hence tax income decreasing also. A bad cycle indeed. Japan and Switzerland have overtly stating they are intervening in their currency markets to decrease the value of their currencies.

Russia and China are calling the United States a leech as the US continues to throw dollars around the world, causing inflation and sucking up the wealth of other nations.

This scenario may not be dissimilar from situations in recent historical periods when the end result was war.

Not an easy thing to say and not highly positive. May be an over-reaction. But looking at the 1930s when currency wars took place and growth was stagnant, nations came down to not competing for scarce resources with debt dollars, but competing with guns and bullets. We all need 'stuff' to survive and it is limited.

If big states, like Italy and Spain default outright, do you think Germany and France, and even China now, will let them keep the assets they have ownership of? May be there will be huge civil unreast first as people blame their own Governments, then larger conflicts as sovereign nations get involved.

The scenario doesn't look good. Perhaps we can all live a little simpler and reduce our resource footprint. Our standard of living is unsustainable. Are we prepared to fight for our current way of life or are we prepared to let some of it go for the sake of ourselves and our children?

Gold in New Zealand dollars: $1974.37 per oz
Previous all time high: $1974.37 per oz

Silver in New Zealand dollars: $46.56 per oz
Previous all time high: $59.19
per oz

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001

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