Gold

[Ferru123]

I despair of the US, and our very own Bernanke, King, will resign before the end of the year IMO - he has failed by any measure.

He has failed, but given the political independence of his post, it wouldn't look good if the government were to sack him.

But I hope Osbourne has the balls to say 'Enough is enough! If the Bank of England are unwilling to execute their responsibility to control inflation by raising interest rates, I'll take the power away from them and do it myself!'.

Gold is the ultimate reserve currency and has been for thousands of years.

I do worry about gold. Generally, bubbles burst, and when this one bursts it could cause even greater damage than the sub-prime bubble...

Jeff

[Ferru123]

I agree.

I think Cameron could go much further, but if he did, that could shatter the Coalition, so I don't blame him.

Jeff

I admire what Cameron is trying to do but Britain is still f*cked whatever they do/achieve.

[superfrank]

If the Bank of England are unwilling to execute their responsibility to control inflation by raising interest rates, I'll take the power away from them and do it myself!'.

+1

Generally, bubbles burst, and when this one bursts it could cause even greater damage than the sub-prime bubble...

-1!

Gold isn't in a bubble. It's just been revalued to it's market price after years undervaluation due to people believing that debt=wealth. It doesn't.

[Ferru123]

Undervaluation relative to what?

Surely gold has little intrinsic value; like a banknote, it's basically worth what people are willing to exchange for it.

Every day in the horse racing markets, you get horses that go up and up in price. Then often there will come a point where the balance of power shifts from the layer to the backer. The layers who had pushed the price up then panic to get out of their position and start putting in back orders, and the price collapses. Surely the same thing could happen on a much bigger scale with gold.

Jeff

Gold isn't in a bubble. It's just been revalued to it's market price after years undervaluation.

[superfrank]

Undervaluation relative to what?

As a store of wealth.

You can't print gold or silver. It has a finite supply.

History tells us that all currency systems ultimately fail. This time will be no different.

[Ferru123]

As a store of wealth.

You're relying on gold increasing in price at least at the rate of inflation. Even if there's not a crash, it's not a certain that will happen. What if, for example, several economically powerful countries decide to raise their interest rates? People might decide to sell their gold and buy bonds instead, which could bring the price down.

History tells us that all currency systems ultimately fail. This time will be no different.

Sterling has been going for a while, and hasn't failed yet. Ditto the US dollar.

Jeff

[superfrank]

I don't pretend that the price of gold cannot fall, but even if countries raise rates their debt burdens become even greater (and they are huge).

Britain is currently borrowing £400m a day.

The £ and $ have had several different incarnations. They came off the gold standard not so long ago...

[Ferru123]

Britain is currently borrowing £400m a day.

To clarify, are you talking about taking on extra debt through issuing bonds?

I didn't know we were doing that - it doesn't really make sense at a time when we're trying to cut the national debt...

Jeff

[superfrank]

Yep.

The average person doesn't know the difference between debt and deficit, and politicians deliberately confuse the 2 (especially the odious Ed Balls who recently compared the budget deficit to a mortgage!).

Even when the budget is in balance (end of parliament on current optimistic forecasts) the national debt will still be growing due to debt interest (currently over £40bn a year).

http://www.debtbombshell.com/

[Ferru123]

Thanks Frank - That's an interesting site.

BTW, I think that the growth forecast is a fantasy! Economic theory says that you can only grow an economy through exports, innovation or investment. I just can't see Britain benefiting in a big way from any of those things anytime soon, particularly as the government is keen on penalizing two of its biggest exporting industries - oil and banking.

Jeff

Even when the budget is in balance (end of parliament on current optimistic forecasts) the national debt will still be growing due to debt interest (currently over £40bn a year).

http://www.debtbombshell.com/