Saturday, January 12, 2013

Currency Devaluation

The Yen is down, Japanese stocks are up.  The dollar is down, US stocks are up.  But in the case of the dollar Vs US stocks over the last two days the dollar did not give up its gains to the stocks.  The dollar was down (via the DXY) 2% over the last two days and stocks managed a paltry move.  It is dangerous when currency is falling and nothing else earns any payment.

Precious metals saw a nice gain on Thursday but came back to earth Friday.  Bonds haven't had a big move in weeks.  Oil sloshed around while the currencies devalued but had front run it anyway.  So in the last few days the world saw its currency devalue with nothing evening out the loss.  This is the most dangerous thing that can happen.

Yet this is what I have been expecting.  Many of us have.  We don't buy silver and gold to become rich, we own it to maintain our purchasing power.  In the long run I believe that is what will happen, and that is why PMs will likely make a nice big move coming up, probably leading up to the debt ceiling debate.

But the currency devaluation of late should make everyone panic.  It is sad that it is not.  People using dollars to store their wealth lost 2% of their purchasing power in 2 days.  We don't need to pity them, for they shouldn't have much faith in the dollar anyway, but the fact is people are scared to invest in stocks and I don't blame them.  They don't know the alternative though - wealth should be stored in things with intrinsic value, namely gold and silver.

No comments:

Post a Comment