Taking into account the constant weakening of the U.S. dollar, as showed by its depreciation against other major currencies, it goes without saying that both the creditors of the stunning U.S. debt
investors in dollars have to revise their policies.
China, the major foreign creditor of the said debt, given the amount of U.S. bonds acquired so far, should definitely think of other assets, completely independent of what happens to the dollar.
Creditors and investors’ psychology is relatively simple and predictable: when inflation and deflation are present or close by, they look for other assets, whether they are currencies, bonds or hard assets, preferably the last, given the global financial crisis. It is a fact that the way down of the dollar has paralleled the way up of hard assets, such as gold
and silver. Therefore, it is likely they are to be the next preferred assets, to fill more and more of investors’ portfolios or creditors’ holdings.
At the same time, were the currency to fail, one can expect these two to be used again as currency, and the fact is, in Utah, this happens already — people buying goods and services with gold and silver. No one could deny, after all, that the gold standard was effective in preventing governments from making faux pas, such as printing too much money, provoking inflation and eventually being unable to avoid
The prospects are grim because the weakening of the dollar may have repercussions not only on the U.S. and its creditors, but also on all the states that keep foreign reserves in dollars or carry out their trade in dollars. And how else, given that right after WWII the U.S. dollar became the world trade currency and at the same time the world reserve currency?
Central banks might have been wise to start buying gold
by the ton a long while ago, but the global financial system is to be surely shaken by a switch.
Private investors have less to risk, if understanding that what has happened to the dollar may well affect other currencies and, therefore, bank assets expressed in them.
They could protect their savings by
investing in gold, in the traditional form of kilo gold bars — physical, durable and indifferent to human follies. Given the ever rising gold prices, there is nothing to fear or risk and there is even the possibility of making some profit by trading them every now and then. This traditional gold kilo gold bar provides all the extraordinary investment benefits of bullion.