Gold and U.S. Dollar

CBP Photo. U.S. dollar bills.

Over the last few years, the gold bugs insisted that gold was going to shoot up to stratospheric heights. Predictions of 3000, 5000, 7000 or even 10,000 dollars per once was being thrown around the internet, print media and T.V. Armageddon was coming and the entire world was going to collapse. The constant hype that every person needed to convert as much of their paper money into gold in the last several years was ridicules to say the least.  Do not misunderstand me, purchasing gold before the gold Bull Run and along the way up has been extremely profitable for astute traders.  Unfortunately, for the hard core gold believers, the precious metals price never went past around $1900 per ounce.

The value of the dollar will be under pressure from time to time, but at the end of the day and for the foreseeable future, the U.S. dollar is one of the most stable, widely traded currencies on the planet. Even though the U.S. Congress, the Senate and President Obama seem to be in perpetual gridlock and unable to pass hardly any concrete meaningful legislation, the United States is extremely secure. Yes, America’s DEBT NEEDS TO BE URGENTLY ADDRESSED    so that the country does not go broke in the future, but historically and moving forward the U.S. is where many from around the world are parking their cash.

People and companies from all over the globe move their money into American banks, real estate, stocks, bonds and other financial instruments because the cash stashed in America is secure and the people moving their capital to America can sleep in their home countries like church mice. From the Chinese businessman, or politician, to the European retiree, to the Brazilian bureaucrat, or the Mexican drug trafficker, the money continues to flow into the good old USA.  The United States has some of the strictest money laundering laws in the world, but when the cash is washed overseas and wired into the U.S. it is very difficult to track down the original source of that currency movement. Nobody can really give a true estimate on how much investment coming into the United States is illicit or ill gained from the country of origin.  Probably most of the notes coming into America is legitimate, but there is also a large percentage that is not. For instance, Miami  during the seventies and eighties was basically built with cold hard cash coming from the cocaine cartels of Latin America.

For all of the problems in America, the country is stable. Although the United States has way too many laws, the political system in the country is rock solid. When the population wakes up in the morning there has not been a coup or religious uprising or other calamity that has brought down the government. The money that is deposited in a bank approved by the Federal Reserve is insured to at least $250,000 by the United States Government.  This is safety and security for a person’s or companies coin deposited in a U.S. bank. Furthermore, the U.S. Dollar is also traded throughout the international financial system and widely used all over the world.  Likewise, the gold bugs who went on and on about the dollar falling off a cliff and becoming worthless during this recent past great recession never factored into their predictions the cachet that the U.S, Dollar still holds around the world.

 

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