retired aviator

Putting the 'Dollar Collapse' in Perspective

>However, the dollar's true weakness is being masked these days >because all major currencies are falling against objective >benchmarks, the principal one being gold.


Gold is hardly an 'objective benchmark' in the greatest panic period in decades. There has been a tremendous flight into gold in the past 18 months, lifting and supporting its price. Physical gold has even been in short supply for the first time -- ask some coin dealers.


Gold is now a poor investment choice in the very long term. I'm not predicting that $1000 is the top for gold, but I fully expect at some point in the future gold will lose all its steam and begin a long agonizing fall just as happened from 1980 to 2003. In the ravaged economy of the 1970's, gold rose to a peak of $800 briefly. Then the economy healed and gold began a slow fall to around $250 in the early 2000's. Someone buying at $800 would have had a 23 year after-inflation return of around -85%!

The reason it is a poor investment is that gold just sits there. It doesn't have earnings or grow like a business. One ounce of gold is forever one ounce.

So gold can be a strange ride that should not be used as a benchmark of currencies anymore (since none are pegged). Gold's long term path simply doesn't reflect any kind of representative basket of things people buy to gauge currency swings or general inflation.