Dollar might not be tied to the gold and silver but it tied to the other factors like GDP growth and cost of borrowing (interest rates). One can hardly make the claim that there are no US assets that could back up the buying power of the dollar.
So basically, the U.S. Dollar is backed up by the exact same things as the Weimar Republic Reichsmark? Ok, in that case I'm not worried.
Or as any other country with fiat currency for this matter. It's more tied to the economy strength than to the real assets. On the other hand people can always buy gold and silver on the market.
Isn´t every USD note and coin bearing the inscription : "In God we Trust" ? So it seems it´s a matter of trust...By the way : is the silver or gold you´re refering to eatable ?
It's not eatable but it can be used to buy eatable products. In case of the weak economy they are likely to be imported from abroad. In the case of global recession gold, silver and paper money are equally useless. Only bread and butter would have a value.
sorry dude...the muni bond thing started awhile ago. FNM and FRE are the scary ones. Anyone who has ever actaully traded on a desk has traded GNMA's and Farmer or Freddie macs on an agency basis...and yet everyone looks at CFC as the ace of spades....I don't get it.
Excellent Commentary All .................................................................................... These are really excellent points....and inspire one to question methods of valuation...particularly in regards to real usage... Normalcy....in a healthy economy would imply that one is rewarded for savings...which in turn supplies funds which are cheaper than the funds from debt...thus savings can be in the form of any asset...including cash.... However there comes a point whereby practicality requires debt in order to create cash flow...and it is actually the cash flow itself....that has the value... A simple example is...lets say you have an individual that has 100 gold bars....but he needs a 25 cent coin to put in a machine to buy water....or he will die of thirst ....Thus what is the value of the 25 cent coin ... A simple reality check would be for one to live in a third world country....why is it that every thing that is purchased tends to be more expensive....because it is imported from a country that actually makes the product....the people in the third world country would have absolutely nothing if it were not for some other country making it... Thus usefulness is what creates value...and there are excellent cash flow arguments with respect to valuation....but the key point here is the origin of the wealth required to create the cash flow... ie The person got the 25 cent coin by previously converting some of his savings...to pay for his water... ................................................................................................... By the way.....the world is now beginning to understand the word ...DERIVATIVE...
Actually, I'm expecting a rally in munis longer term, particularly if the democrats come into power, as they will likely raise taxes on the wealthier, increasing the importance of tax-free holdings. While a 4% yield at the 35% tax bracket gives you a equivalent yield of 6.15, if you jack up the tax rates back to 50%, its closer to an 8% equivalent yield. Even if you drop the yield on the muni to 3.0%, at a 50% tax bracket its still a 6% tax equivalent yield. Although the creditworthiness of municipalities does become of some concern, I agree. I am not sure how best to play this out. Perhaps sitting in cash for a while to allow the defaults and credit problems to show themselves and THEN moving into this asset class is reasonable. Will have to think about that. Good discussion thread.
So.... What nations have currencies that are 100% backed by precious metal or some other commodity? Any?