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Race To The Bottom

9 February 2010 3 Comments

Fiat currency critics often talk about the race to the bottom meaning the competitive devaluations of currencies in order to stimulate exports and “growth”.  Today, we saw a form of a bailout of Greece (or at least the rumors of one) by Germany and maybe a few others.  Germany, being a major export economy is happy with a weak Euro.  But, weak against what?  If the U.S. dollar is turning to crap at the same time, doesn’t the Euro need to be weakened even further?  It’s a compettive downward cycle.  It’s a race to the bottom.

Really the only answer to this “race” is to own physical stuff with value.  Precious metals, food, water, bullets, whatever.  The craziest thing is that just how common and accepted the idea that a continuously weakened is a positive move for an economy is.

But, why be gloomy?  After all, Greece has been saved! (or about to be saved!)  So, next up… Spain, Portugal, maybe Ireland, maybe some Eastern European countries like Latvia, then maybe Japan, the U.K., the U.S. errrrrr wait.  Then, we can just print a few more quadrillion dollars/Euros/whatever and pass out free money.  We’ll all be rich!

Ok, back to reality.  I’ve been looking into physical precious metals (as opposed to paper precious metals – ETFs, etc.), and it is amazing how tight the supply is.  Furthermore, the premiums on gold and silver coins are much higher than I thought.  Clearly, the demand is outpacing the supply for physical, real bullion.  People want the security of having it in their possession, and I don’t blame them.

Speaking of… tomorrow’s post is entitled a beginner’s guide to buying gold coins.  Be sure to check it out in the morning.  G’night.