Gold as a Potential Currency
China, India, Brazil and Russia last year called for a replacement to the dollar as the main reserve currency, after the financial crisis sparked by the collapse of the U.S. mortgage market led to the worst global recession since World War II. The Euro is a poor choice to counter the dollar as is the British Pound. Britain's national debt is over 450 percent of GDP. As for the Japanese yen, it too is growing toxic. On a per capita basis, the Japanese government has the highest national debt levels of any industrialized nation. Its demographic time bomb is even worse than the United States. The best way to counter the falling Dollar is an investment that does not rely on the performance of any government organization or individual. It's one that has a long history of being a refuge against currency inflation; one that has inherent value with no counter party risk; one that can be privately purchased, privately owned, and safely stored; and one that is eagerly sought and accepted around the entire world. That would be gold. China has roughly one-quarter of the world's entire population, and it has started to buy gold in extraordinary quantities. China is the third largest economy in the world, and nine years ago Chinese gold reserves stood at 394 tonnes (metric tons). That rose to 500 tonnes in 2001 and to 600 tonnes in 2003. Then the purchases stopped. Now they've resumed with a vengeance. China's gold reserves have jumped to approximately 1,054 tonnes. A few more reasons why gold is a great investment now, and could one day become the next world currency:
- The dollar is a dead currency walking. The only reason it hasn't imploded yet is because other nations have trillions of greenbacks in their vaults, and they would lose too much if the dollar crashed.
- Finite supply of gold and investor demand remains high.
- Investors are learning that the major currencies in the world (U.S. dollar, Euro, Japanese Yen) have major risks to the downside. This will lead investors to own gold.
- Central banks have been diversifying their reserves into gold and this trend should continue.
- In addition to China recently doubling its gold reserve, India recently bought 200 metric tons of gold (instead of buying more dollars) and Russia is increasing its gold reserves, too (instead of buying dollars).
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