Well I have been saying that the current world nation state system is not sustainable. Many emerging market countries exist in their current state due to imf/world bank intervention again. These countries, such as Pakistan, Congo, etc have no HISTORICAL place of existence in the history of the world. As I have already said these countries will return to their pre-Western incarnations once the Western-controlled financial system dissipates. Pakistan in particular, which is a nuclear country was on the verge of bankruptcy a few months ago and are dependent on imf loans for survival. Many emerging market governments are structured as Western-influenced republics without any traditional backing, how is that sustainable without western support, when the natives do not even have respect for the governments themselves. Yes the US is very wealthy. The poor are so obese they need illegal immigrants to work for them. The US has the most prisoners in the entire world out of any country, jail housing is expensive, before Obama's Stimulus package was announced many states were saying that they need to release prisoners imminently in order to fill in budget gaps. Eventually no stimulus in hell will be able to stop the deleveraging and you will have a large prisoner class released, as well as many unemployed individuals competing with illegals for work. No one is denying that it is a bubble economy, the question is how long is it sustainable. The US is so wealthy in fact, the recent news is about teen 'sexting' where states are considering sending 16 year olds to adult prison for taking pictures of themselves, do you realize how expensive a proposal like that is? At least in Saudi Arabia and Iran, they keep it simple they will either cut their hand off or simply decapitate them, without incurring costs to the state for housing prisoners. Americans are living in fairy tale land. Most of the world has at least an understanding of what poverty is. American jails are day camps compared to third world prisons, in third world prisons, prisoners aren't even fed properly and are often forced to labor. The reason why Americans are so wealthy and emerging markets are becoming wealthy is not due to the fact that Americans invest in foreign markets it is the opposite. The amount of dollars and dollar-denominated debt held by foreigners far outweighs the investment America pours into emerging markets. Why do you think that the US/UK is cracking down Swiss banks, but not the British tax havens like the Cayman Islands which is one of the largest financial centers in the world by the way. American and British banks have affiliates in the Caribbean, so that foreigners can prop up the American standard of living by holding their wealth in US dollars and dollar denominated debts. IMF/World bank and the WTO are inherently western institutions. America has veto rights and political control in all of these organizations. The British commonwealth comes in second, so The parent and the offspring are now working together to maintain the Anglo-Saxon financial system, which is failing in case you didn't notice. Much of this investment is actually fantasy, this is what happened with the crash of 87, then the tech bubble, then the housing bubble, now another bubble has to be created in order to sustain the entire financial system. Derivatives and inflated asset prices that are way out of proportion relative to GDP are not sustainable by any means.
Ok...I'm going to say this in less words, because you still haven't addressed my main point. Where is foreign investment money (I'm not talking about American investment dollars here), but where are the foreign investors going to put their money when the emerging markets collapse due to their export economies going into save mode? I don't care about your doomsday predictions about the US or any other statements about how we are going to have civil unrest. Address this point. This is the key point that nobody wants to tackle when they ramble on about the "doom" of the United States. Let's say you are a foreign investor. WHERE are you going to put your money? Into an economy whose risk is very high due to less predictability of their governments which reward is now no longer offsetting the risk, or a developed economy like the US? Nobody is willing to address this question. Not Jim Rogers or the other leftists around the world calling for the doom of the US.
Look-up your history. Before 1971, the world reserve currency was backed by GOLD, this was why countries accepted Bretton-Woods to begin with. Precious metals were a safe haven for at least centuries. http://www.answers.com/topic/bretton-woods-system Between the signing of the Bretton-Woods agreement and 1971 countries purchased gold with trade surpluses instead of treasuries backed by the "safety" of the US government alone. IT is not that gold has intrinsic value alone, it is simply that it is mainly a non-industrial commodity with a limited supply, so it has the ability to keep its purchasing power relatively.
ok...I see that you have no interest in tackling my question. I don't blame you. It's the nagging question that all the emerging market fanbois/leftists prefer just pretend doesn't exist.
Are you blind or in denial? Gold was the original reserve for the reserve currency. Gold has no counter-party risk, it is a precious metal with limited supply. Do you understand economics 101?
Do you not understand the concept of an investment? Gold is not an investment. Like you said, it's a "placeholder" for cash that won't lose it's value. Let me give you an economics lesson. To invest, you have to buy an asset that GROWWWSSSSS because of the profit opportunity. Gold is just a shiny metal. As for an investment? Without using that commodity in GROWWINNGGG economies as input into other goods, it will never really appreciate unless it is a bubble. So again...care to tackle the question or throw up more smoke screens? If emerging markets don't GROWWWWW because their export economies stop buying, and you are a foreign investor looking for PROFIT...not a placeholder for your money from which you'll never reap a dividend or profit growth, than where are you going to put your money to justify the risk. For the last time, I'm not interested in your doomsday scenario. I think it is idiotic and obsessive in all truthfulness.
The very reason why the dollar is doing so well right now is due to Americans sitting on cash, once they start spending, the velocity of money kicks in. IF many of these US-consumption based businesses like Disney are based on a fantasy do they have real value? You sound like the same type of person that would have been hyping the tech bubble before it popped. Hard asset backed companies will do well, as the purchasing power for mining the material will stay, but the cost to extract the product will decrease due to deflation temporarily. Look at the history of how gold has performed, it keeps its purchasing power in both deflation and inflation, and as money supplies around the world are increasing the value of gold will rise as a result of decreasing value of paper money. It is not a doomsday scenario, it is the result of de-leveraging. The reason why the US is an IMPORT MARKET is due to the fact that the value of the currency itself is propped up by foreigners, why wasn't the US always an import nation? IT is not sustainable if the spending becomes excessive. Why should treasuries be considered "investments" if they are supported by a bubble?
WRONG...the reason why the dollar is strong right now is NOT because of Americans sitting on cash. It is strong because foreign investors have been buying into it as it is much safer than emerging markets in terms of government actions. It has also strenghtened because the purchasing power parity has been so out of wack. It is strong because of deflationary fears. There are a multitude of reasons with the big one being that foreign investors still trust the dollar. Again...gold is NOT an investment. You don't buy gold to compound your money. You buy it as a temporary placeholder contrary to what all the gold bugs and leftists wish. And lastly...you STILL HAVE NOT addressed my question. If you are a foreign investor LOOKING FOR PROFIT...where do you put your money? In high risk non-growing emerging markets that have zero innovation? Or relatively lower risk flat developed economies like the US. Why are you so afraid to answer this question directly? If you know jack shit about gold, then you can't possibly argue that it is a place to put your money as a basis for profit and as such, you haven't addressed my question about where you put your money FOR INVESTMENT.
And also...you've referred to the American economy as in "importer". Why don't you define exactly what that means to you?
The only reason why the dollar is doing well is due to the fact that it is the reserve currency. The innovation of America did not give it a high standard of living for consumer based business or prop the dollar up. The logic is faulty. Asset price Bubble do not have real value. What are US Treasuries backed by? The "promise" of the US government, that is it. America is not #1 in innovation, how many times do I have to repeat myself? The US wasn't always an import nation, the reason it is an import nation, is due to the very fact that foreigners prop up the US dollar and increase the purchasing power of Americans. Again, pre-Bretton-Woods America was not a wealthy haven.