Gold is at a new record, on rumors that the Gulf states will dump the dollar as a pricing unit for oil. I don’t believe that will happen, yet. But if the Keynesian idiocy persists in Washington, it will happen simply because the dollar will be unsustainable.
I wrote about gold’s use as a hedge on Sept. 15 over at Asia Times Online. Gold is less an investment asset then a long-dated put option on the end of America’s world role. As I wrote three weeks ago,
The world not only is stuck with the United States for the time being, but wants to be stuck with the United States. But the Barack Obama administration’s attempt to substitute government spending for collapsing consumer spending makes US assets less attractive, while its attempt to diminish America power on dubious ideological grounds forces other countries to act as rivals, unsuited and unwilling as they might be to do so.
That is why options on the end of the US are trading well in the form of the gold price. Gold will have no official role unless America’s international role really does collapse, and the world is reduced from a system of trust (or imperial dictates, which amounts to the same thing) to a kind of barter at the international level. That would be a situation much to be abhorred, but it is not to be excluded. The world may need an alternative to the dollar if Obama persists in his present course.
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