New plea for good old gold
The next stage of the ongoing 2008 global financial crisis is upon us. Preparing for the future is more important than ever.
Brilliant investigative writer David Stockman recently said that Japan “jumped the shark” with the Bank of Japan’s recent monetary “easing” (printing money from thin air) to buy overinflated “assets” (stocks).
Stockman and other analysts cite Japan’s staid economic environment, with Japanese Prime Minister Shinzo Abe’s “third arrow” of allowing companies to fire nonproductive workers failing to land on target, the demographic time bomb and the unprecedented actions by the Bank of Japan. He forecast that devaluing their currency would send a wave of deflation across the investment world.
That is not all, because there are bubbles everywhere: Chinese housing, worldwide shipping, cement and steel, shadow banking and insane stock market valuations with no regard for fundamentals or cash flow.
It appears that the lunatics have left, but no one knows who is running the asylum.
Investors mistrust China because local Chinese “leaders” are incentivized to lie to Beijing’s central “government” about their GDP statistics. Exports from China to Hong Kong show strong numbers, but Hong Kong’s corresponding import number is substantially lower. Who is telling the truth?
Taiwan’s banks and investment houses would do well to cut their exposure to China as soon as possible. Taiwanese businesspeople with interests there would be smart to sell their stakes and get out before the “Made in China” investment stampede tries to exit with their wealth and their families through a rather narrow airplane door.
The idea of opening up new wafer fabs in China is absurd. Global growth is slowing because the world are rapidly approaching a “leverage peak,” a time when central banks printing money from thin air cannot and will not save us all.
On the other side of the coin, there is Switzerland’s Nov. 30 vote on whether the nation should repatriate its gold, buy some more and maintain a strong currency vis-a-vis the money-printing Western banks.
The next global financial disaster is in the making and clearly visible on the horizon. Switzerland is planning ahead, and I expect the referendum to pass.
Russia and China have been hoovering up most of the world’s gold for the past few years. Meanwhile, paper money enthusiasts (governments and central banks) have been consistently smashing the gold price down with naked shorts.
For the Swiss, who love their elegantly democratic canton system and typically disdain the diktats of their central government “leaders” who predict catastrophe without their ability to print money at will, it is forecast that the Swiss will rally for gold and demand a strong and stable currency — a strategy that has consistently worked in the past.
In these fragile times, the US dollar is particularly vulnerable. Taiwanese and Taiwan’s banks should sell US and EU paper and buy physical gold, stored in their vaults. I urge individual investors to visit local jewelry shops and buy gold coins.
The big banks cannot manipulate the price of gold forever. Buy gold now, while it is still on sale.
Torch Pratt
New Taipei City
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