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Tuesday, January 5, 2010

A Question Of Economics: Pt III

There's something eerily familiar about all this "buy gold now" shouting. Even Pat "9/11 happened because God hates gay people" Robertson is in on it too:

Again, I'm not an economist, but when I see people like Robertson, Beck, Hannity, Liddy, and various other conservative hacks pimping the precious metal I think one thing : bubble. And it's not going to be long before it bursts. And rest assured, when it does there's going to be some seriously enraged right-wingers.

But I can hear you say, "but airon, gold hasn't dropped in value for over 10 years". That is actually very misleading, since as recent as last month, gold dropped by over 4% while the dollar increased in value. And won't it stand to reason that the more people invest in gold, the more that the market is flooded with it, that the value will decrease by larger amounts at a faster rate?

All this gold versus dollar hysteria is apparently driven from the hyper-inflated theory that the dollar is going to be removed as the worlds default-currency, that it's going to be replaced by a "mixed-bag" of currencies from other countries. Not only that, but since China is the largest gold-producing country in the world, this is incentive enough to get certain American twitching with fear, feeling like they have to invest millions in gold as soon as possible.

My theory for China is this, they don't have the luxury of letting the dollar fall off the international/world stage, as all the treasuries that they have purchased from us are valued in dollars, not gold. If the dollar is no longer the yard-stick of the world economy, it stands to reason that those treasuries will be devalued and China will take a huge loss.

Then again, I could be wrong.

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