I found this article interesting – it suggests that the G20 meeting this weekend could devalue ALL the major currencies of the world – if I understand correctly, the article is suggesting that a revaluation of gold (to some higher price that all the central banks of the world would pay for any gold presented for sale) could automatically devalue all the fiat currencies by some amount – the article further suggests that the new price of gold would lead the prices of all real assets higher (aside: how would this feed into real estate prices?)
The idea that a currency devaluation helps ALL debtors is interesting – if my $2500/mo mortgage remains $2500/mo but the currency has been de-valued by a factor of 10, what has really happened?
if my employer immediately raises my pay by a factor of 10 then I’d be fat and happy – before the devaluation I was paying 30% ($30K mtg on $100K income) of my income for housing and after the devaluation I am only paying 3% ($30K mortgage on $1 mil income)
of course, after the devaluation everything that I use on a daily basis is going to increase by at least a factor of 10 – gasoline, food, services, etc – these were real-time costs (as opposed to existing debt) before the devaluation and they remain real-time costs after the devaluation – if I was spending 50% ($50K out of $100K) of my income on these costs then I will continue paying 50% after the devaluation ($500K out of $1 mil)
all of that rambling is based on the premise that 1) I am employed, and 2) that my employer increases my pay by a factor of 10 at the same time that the currency devaluation is enacted – reality is that there are a lot of unemployed people and a lot of small business owners who don’t fit into number 1) and number 2) is pretty far-fetched IMO – I wonder what happened in Argentina, Mexico, etc during major devaluations of the currencies?
in reality there is probably a significant time-lag before any increase in wages occurs – people living paycheck-to-paycheck will get squeezed hard as prices rise for everything involved with daily living while wages remain stagnant and jobs become harder to come by
another interesting thought about revaluing gold: the US (supposedly) has 3200 tons of the stuff which makes the US a major holder – the US is also the world’s biggest debtor – if a revaluation of gold actually reduces the burden of outstanding debt, then who stands to gain the most from said revaluation? (hint: “the US”)
“The US $700 billion bailout and the UK and EU versions are a futile attempt to prop up the $1.5 quadrillion derivatives bubble. Sensible economic policy starts with wiping out the derivatives cancer.”
these derivatives are absolutely worthless – ie, zip, zero, nada, etc – how many ways do you have to say it before people get a clue – all of the current “rescue” attempts (notice how the media has shifted “bailout” to “rescue” over the past 2-3 months?) are trying to maintain the status quo and the status quo is unmaintainable (ie, can not be maintained)
I read one article suggesting that all of the derivatives be declared null and void – basically yell, “olly olly oxen free”, and have all the parties and counter-parties to the derivatives take their worthless paper and go home
interesting times, these – hard to say what is possible anymore much less likely
