Broad Oak: your emotional support animal

Thursday, February 05, 2009

Global monetary inflation and the threat to peace

Last week, I suggested that we could be entering an era of competitive currency devaluation. Now, Mish sees it happening in Russia, Mexico, Indonesia - and hints of intervention in Japan. The Canadian National Post predicts a drop in the US dollar, too (htp: Jesse).

Can the Euro -already strained by member countries moving in different directions - take this pressure? A friend told me recently of an old restaurant incident involving people he knew, where first one "did a runner", then another, so that the last man left at the table was stuck with the whole bill. This is a game that punishes the virtuous.

Gold is supposed to be a haven in such conditions, but is already above its long-term post-1971 trend, as I show here. So the bold investor might buy in now, knowing it's high but hoping it'll go higher (or fearing that other things will go lower still). Others say silver, or oil, or agricultural land. "The best lack all conviction, while the worst / Are full of passionate intensity."

These are tricky times. As in revolutions generally, it's hard to see which faction will be victorious, but loss, injustice and confusion are certain: "we are here as on a darkling plain / Swept with confused alarms of struggle and flight / Where ignorant armies clash by night."

This may seem over-dramatic; but when money ceases to be dependable and deadly dull, everything else becomes much too exciting. If the middle classes suddenly find their savings wiped out by inflation, their assets generally devalued and their businesses and employment under threat, watch out.

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