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Gold : demand vs rate
. In the world where fiat currency is meaningless , Gold is the
. Safety valve.
. A store of transition value till fiat currency stabilizes.
. End of the day, gold is transactionally clumsy
. But in the mean time it's a safety valve or overflow tank.
. While demand for Gold may be real and practical in times like this
. It itself is subject to speculative money .
. The very anti thesis that it tries to stabilize.
. So maybe Gold will also go back to US$ peg.
. At a fair value, stabilized , not subject to speculative money
. The very thing that government is trying to fight.
US & Benanke's Dilemma
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. US is balancing low interest rate and inflation.
. Raising interest rate will raise interest payment which potentially bankrupt it literally.
. While not doing it will just let inflation erode it's asset value.
. Its a matter of tike before inflation sets in.
. Fed thinks it has a window till 2013 to get its house in order.
. Where the public-private infrastructure projects kicks in.
. While it trues to drum up economic activity in Africa, MENA, Indonesia
. While also containing Iran and forcing it to abide by OPEC policy.
. And concurrently reduce it's defense budget.
Financial weapons of mass destructions : Deriviatives/Options
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