US$, Fiat Reserve Currencies & Gold
With Special Guest Axel Merk
President & CIO Merk Investments,
Manager of Merk Funds
& Gordon T Long & Ty Andros
34 Minutes, 46 Slides
In Part I of this 70 minute two part series, Axel Merk in discussions with
Ty Andros and Gordon T Long covers a broad range of the most important Global
Currency issues relevant to investors. Named a Currency Guru by Morningstar,
there is no one more qualified to assist investors understand this complex
environment. Though markets may appear unpredictable, Merk Funds' research
has found that politicians are not. Currencies markets most closely reflect
the Macro realities without taking on associated equity and interest rate
risks. Currencies are the cornerstone of successful investment strategies
in the global financial markets.
Currency: US Dollar
As serious as the issues are with the US Dollar losing its function as a "store
of value", it is best viewed as the "least ugly" within the world's beauty
contest of fiat currencies. As such it is likely to be the last to fall as
global fiat currencies feel the pressures of having over-inflated their currencies
while allowing negative Primary Current Accounts. The US$ is presently the
safehaven for investors singularly because of its liquidity, rule of law
and a dominant sovereign military.
Currency: Fiat Reserve Currency
As global currencies have been moving more and more away from the Gold Standard
over the last 100 years, investors must continuously re-evaluate the "risk-free" element
of their portfolio. This is now urgently dictated, since with negative real
interest rates most currencies are no longer a safe 'store of value". It
is a simple reality or "new normal" that Investors cannot trust the government
to protect their purchasing power for them and must adopt personal strategies
that match their own risk tolerance. The days of 'mom and pop' investing
are over as macro and monetary decisions control the investment landscape.
Currency: Gold
Aggressive accumulation of gold by Emerging Market Central Banks and the Bank
of International Settlements (BIS), suggests that the historic shift to fiat
currencies is 'running out of runway'. In an increasingly unstable world,
changes are overdue. Axel argues that the solution will unfortunately not
be another Bretton Woods Monetary agreement, but rather is likely to first
lead to chaos and social disorder before any possible consensus can be reached.
Gold will continue to be volatile, especially when priced in US dollars and
with parallel distortions by the bullion banks in disconnecting the physical
price of gold from gold's 'paper' price.
Currency: Euro
Though the Euro is the only major currency not backed by a tax base nor an
army, it is in fact the most difficult currency to debase. Poorly understood
is how the ECB has been successful in holding up the Euro by 'mopping up'
liquidity, despite an expanding and seemingly intractable crisis in the peripheral
nations throughout a relentless six quarter recession.
Axel Merk lays out what the surprising hidden strategy is for the survival
of the Euro, both from a sovereign and banking perspective.
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