Tag: MarketWatch

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Gold Panic

gold cast bar
Fifty-One Thousand Sexy Dollars

Brace yourself for more irritating, hyperactive adverts on TV, more men with laptops and weighing scales in shopping malls, and more burglaries. Gold has reached a new record price of over $1600 per ounce. This means that, for the first time ever, gold is now actually worth its weight in gold.

But I shouldn’t get surreal, the reality is ridiculous enough. Buying gold is the global economy’s answer to popping valium and praying. Whenever the markets don’t know what’s going to happen or what to do next, they run to the yellow metal. There is no clear reason why, it just has this talismanic ring to it. Weight. Historical value. Shininess.

Also of course, it’s an actual thing. All those brave traders out there, wildly speculating all day on derivatives and futures and other fanciful ways to bet on how other people will make bets on how you will bet suddenly realise that all they own are pieces of paper written in the conditional mood, and succumb to an urge to possess something that you can actually hold and touch and hug. Or at least, a piece of paper that says you possess something you can hold and touch and hug.

This superstition-based value is highly dysfunctional. The problem with the flight to gold is that there is not enough room in gold. You’ve heard that factoid about how much there is in the entire world? Enough to fill just two Olympic swimming pools. It depends of course on how deep those pools are, but this is roughly right. There are something like 155,000 tonnes of gold lying around. Assuming that ounce price is for troy ounces, the normal ISO (International Silly Old) unit, and that comes to about eight trillion dollars ($8 000 000 000 000).

That’s hardly the current account deficit of a small South American republic these days. With the Euro in dire straits, there is clearly a lot more money needing somewhere to hide than that, and all the gold in the world is not a big enough hiding place.

Unless, of course, its price goes up even further and even faster.

You can almost hear the new wars starting in Africa, as it becomes lucrative once more to arm some children and turn over a neighbouring country. (Arms manufacture is always a good secondary bet when gold goes up.) Oh and if you have any gold fillings, now would be a good time to cash them in. Before someone else does, with a brick.

Categories
Humour Politics

Good Morning, Euro. Euro?

Project 365 #125: 050510 Take Note
Will you still be here when I wake?

Sometimes I miss the old lead-times of print publishing, where you’d submit copy to be published hours or even days later. You had to predict, think about the future. So I’m writing this last thing at night, but setting it to be published at 11 a.m. (GMT+1) – seven hours from now, and hopefully when I’ll be getting up.

What I’m wondering is whether, by the time you read this, there will still be a Euro.

How does a currency cease to be? We know of one mode of course. Hyperinflation – when its value evaporates until it’s worthless. However the Euro remains strong – ridiculously strong perhaps, when you consider the condition of the economies that use it. We may in fact be witnessing the previously-inconceivable opposite phenomenon: runaway hypoinflation.

Alas, this doesn’t mean that the Euro notes in your pocket are going to become infinitely valuable. It’s not that opposite. But it means money is getting too expensive. We can’t afford to borrow as much as we need. And that leads to economic collapse just as surely as it becoming valueless would. Unfortunately however, some countries can’t afford it much sooner than others can’t. So the Euro is dying by a process of killing the economies that use it, one by one.

How can we get out of this? We could print the extra Euro notes we need, but that’s illegal. We could drop out off the Eurozone system and print our own currency again, but that’s a drastic extreme that will lose us a lot of friends.

I can think of a simpler way.

Stop checking for forgeries. Don’t accept obvious fakes of course, but quietly turn off the UV lamps and other hi-tech testing devices. If it looks real, take it. There are a hell of a lot of good fake notes floating around the continent, and we could bring them all here, vastly increasing the money supply. At a stroke, we’d have all the cash in circulation we needed. And there’s not a darn thing they could do.