Wednesday, October 12, 2011

One Plan; Gold.

The Merkel/Sarkozy and euro plan-fest continues it's laughable way to inevitable failure.

Each day we hear of another half-hearted plan by euro leaders to stem the increasing lack of confidence in the European banking system as news continues to be negative. QE is announced by the Bank of England, Dexia Bank in Belgium is partly nationalised, Erste group is exposed to too many credit default swaps and is tottering on the brink...and so it goes on.

Banks in Europe are exposed to too many bad assets. Assets invested in during the good times using easy money. When banks rushed into the ponzi schemes of sovereign debt not thinking of the risks. After all, money was always going to be cheap and central banks will always bail them out. Or so they thought.

Now that the tide is going out, we are seeing who is swimming naked. Dexia and Erste are insolvent. Not that the balance sheets of these banks would give you a clue. Apparently, most of the assets lodged there are still at the values they were when purchased. Are Greek mortgages even worth the the paper they are not written on? No.

So the plan to plan a new plan is paraded onto the news wires only to be sucked up by traders and market-makers and away goes the share markets and commodity prices again. Up on the new found wave of some ethereal hope of all being fixed and growth to come.

But it's spitting in the wind. The goal is only to try to have an orderly unwinding of debt and a orderly injection and stabilisation of bank capital. Perhap the leaders think we'll all get sick of it and just carry on.

Well, the growing protest movement is putting paid to that plan. People are catching on fast that an insolvent bank means their wealth is gone and that new cash to re-capitalise (print money) that same bank means their wealth will be further eroded through an increase in the money supply; inflation.

In times like these timing is of the essence if you want to preserve your wealth. The options are few, but, if gold is the ultimate money and has a history of being so, then perhaps a plan to own some is fast becoming the best option.

Or just trust Merkel and Sarkozy.

Gold in New Zealand dollars: $2132.03 per oz
Previous all time high: $2284.16 per oz (19 Aug, 2011)

Silver in New Zealand dollars: $41.20 per oz
Previous all time high: $59.19
per oz (30 Apr, 2011)

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