Just imagine…
It’s 2012 and the world realizes the euro can’t make it as a currency. Greece, Portugal, Spain and Italy have all been repeatedly bailed out. Germany and France have had enough. They tell these weaker countries to get out of the euro or Germany or France will go it alone.
Meanwhile, in Canada, the air has finally been released from its overheated housing market and the economy is on shaky ground for the first time in almost 20 years. In the U.S., years of printing money are causing rapid inflation. Interest rates are rising, as investors want higher and higher returns from U.S. Treasuries. Debt has become a big problem for states and municipalities. The sovereign debt issues of Europe have crossed the Atlantic.
By late 2012/early 2013, countries around the world are in a race to devalue their currency. So they come up with any idea.
The central bankers of the G7, or maybe even the G20, meet to discuss an across-the-board devaluation of world currencies. But if massive currency devaluation is going to happen, what will be the reserve currency?
It can’t be gold, because there is not enough gold in the world to satisfy the reserve, even if the price is $3,000 by 2013. America joins China in making a new reserve currency composed of U.S. dollars and Chinese renminbi, 20% backed by gold.
Could this happen? Let’s put it this way: while I don’t have a crystal ball, I’ve seen stranger things happen. What I do know is that, sooner or later, something has to give with the euro and the greenback. That’s what the 10-year bull market in gold bullion has been telling those who listen.
Michael’s Personal Notes:
There is so much to say this morning, so much to write about. Fortunately, most of the action is happening outside the United States.
Moody’s Investors Service cut Portugal’s long-term government debt credit rating to junk status yesterday afternoon. Greece, Portugal, Spain, Italy…they are all in trouble. While just Greece and Portugal have “officially” had their credit ratings slashed, I predict Spain and Italy are next.
The entire euro region, except for Germany, is in trouble. And I don’t want my readers to underestimate how fast those troubles could spread to North America.
From the other side of the globe, this morning, we get the news that China has raised its benchmark interest rate for the third time this year, as inflation is accelerating at its
fastest pace in China since the summer of 2008. (So much for the naysayers who said China was a bubble about to collapse.)
In China, a one-year deposit with the People’s Bank of China…
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