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RE: The US Dollar Is Screwed Part 2 - How I'm Protecting Myself

in #economics • 7 years ago

Why do you believe gold/silver to be undervalued? They've been traded for millennia and as such have found an equilibrium price. If anything, I believe them to be significantly overvalued, as their electronic properties are outweighed by jewelry and "safe investment" buyers. Their lack of practical uses outside of electronics means precious metals may just be one of the largest ongoing bubbles in history.

7 years ago in #economics by
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     7 years ago (edited)

    Why do you believe gold/silver to be undervalued?

    I appreciate your comment. To name a few of the reasons:

    • I think the dollar is significantly overvalued (reasons outlined in part 1 on my blog, which involves trade deficits and debt). The value of the dollar and the metals are inversely correlated.
    • The market and governments believe in Keynesianism, which I'm confident is a broken economic theory.
      Their way to "fix" the economy is to force interest rates down and create obscene amounts of currency units.
    • Manipulation of interest rates creates massive distortions in the economy. When those distortions eventually correct themselves, massive disruptions happen. These disturbances create economic chaos, making people run to the metals.
    • Creating significant amounts of dollars devalues the dollar. A devalued dollar means a higher price for the metals.
    • The market is pricing in too many interest rate hikes. They think the economy is strengthening and interest rates are going to normalize. They're wrong.
    • I believe the Fed is going to force interest rates back down, probably negative, and launch another round of monetary stimulus. Low-interest rates are good for the metals and bad for the dollar.
    • I believe the US government will do significant fiscal stimulus, which is good for the metals.

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