Simple and Sustainable Forums: AndersB - Viewing Profile - Simple and Sustainable Forums

In my very ignorant opinion, there seems to be a relationship between the gold price and the price of other commodities - such as oil.

The commodity prices are generally stagnant or falling. They require strong economic growth for prices to remain elevated - especially since projects to increase supply comes on-line during the next few years.

But I really cannot see another economic boom period happening in the next 12 months.
- The European story will take over a year to play out - probably longer.
- Japan is in a funk and long term they are (non)breeding themselves to a shrinking economy.
- China has already overspent on fixed assets and infrastructure - more of the same will have diminishing returns for their economy.
- Other BRIC member countries are stagnating.

On the other hand, there are positive signs in the US - but I think this is mainly due to manufacturing slowly returning to domestic production - which is at the expense of the rise in Asia (which indirectly affects the Australian economy negatively).

Hence, I am keeping most of my assets in $US cash for a while longer - with no gold in my portfolio at all at present.

Pr0, on 20 May 2012 - 11:29 AM, said:

Could you explain your post a bit more, Pr0? It comes across as something like "people are suffering here so stop thinking in terms of money and instead alleviate the austerity with money"

Bernard L. Madoff, on 20 May 2012 - 09:25 AM, said:

I agree with Ann Pettifor that Greece would be better off longer term to have their own currency. Any common currency where you don't have fiscal control of the union members is doomed to fail. Argentina and Iceland proved that not caving in to international bankers can lead to excellent outcomes.

I especially admire the Iceland government that stood up to the bankers. It was not the profligacy of the Iceland public sector that caused their problems, rather it was the gambling of their own private banking sector that was the root of their problems.

But Greece (and the other periphery countries) are not totally victims of external circumstances here. Greece lied (with the help of Goldman Sachs) about their fiscal prudence so that they could qualify for euro membership. They then went on a borrowing binge since they could get credit at much lower interest rates than when they borrowed in drachma. Now there is the bill to pay after the end of the party.

I think Pettifor is painting a biased picture to call all buyers of Greek debt as speculators. How much Greek debt is owned by the ECB now? Is ECB also a speculator?

However, I agree that in the long term it is best for Greece to go back to drachma - but this will still require painful changes, both in the transition period as well as structurally on an ongoing basis.

From https://www.cia.gov/...ok/geos/gr.html


- The public sector of Greece is 50% of their economy (this is very high!)

- The government budget deficit was 9.6% of GDP

But before the debt restructuring the budget deficit grew towards 15% of GDP.
http://online.wsj.co...0653206132.html

This means that the Greek government used to spend 30% more than their tax revenue (public sector being 50% of the GDP economy).

As wulfgar pointed out before, even if Greece were to default on all their debt - they cannot avoid austerity. Re-introducing the drachma would make it impossible to borrow *any* money from international money markets - at least for an initial period.

Therefore, the Greek government can either choose austerity imposed on them by euro lenders - or default on their debt and face reducing government expenses by 30% in a drachma environment.

It must be time for Goldman Sachs to put Greece up for sale on eBay.