Autumn is nearly here, and I am reminded of stock market crashes and one near plane crash. The September equinox marks the anniversary of when my Uncle Richard and I fell from the sky in his Cessna 172. I haven’t had such a close call since, yet I have a lot of anxiety these days — not about flying, but about the stock market.
According to reports from The Associated Press, Venezuelan President Hugo Chavez formalized the nationalization of the South American country’s gold mining industry early this week in response to rising concerns about the value of the U.S. dollar.
As the price of gold continues to rise (gold topped $1,900 per ounce on Tuesday), there has been a lot more noise on the Internet and occasionally in other media warning about the run-up in gold prices being a financial “bubble.” This couldn’t be more wrongheaded.
The Swiss government took steps Wednesday to weaken the Swiss franc, which has enjoyed record-high strength recently. According to CNBC, the government announced that it wants to inject 2 billion Swiss francs into the economy, in order to combat overvaluation of the currency.
Gold’s explosive move to new nominal heights reflects more than an expansion of the European sovereign debt crisis and Standard & Poor’s downgrade of U.S. debt. It also reflects the expectation of massive liquidity injections — in the U.S., in Europe and around the world — to pay off the massive debts that have been accumulated.
The price of gold topped $1,700 an ounce Monday, as investors continue to place their confidence in metals over currencies. The European Central Bank had attempted to allay fears by widening its bond-buying programs to include Spain and Italy, but traders remain nervous.
What really worries me about our future is the unknown that might jump up and bite us. Things that are not only unpredictable but are counter to anything we might expect. Essayist and practitioner of mathematical finance Nassim Nicholas Taleb has a term for unpredictable events: “Black Swans.”
Only once have I looked down the barrel of a gun. I can tell you it was damn disconcerting. It happened 25 years ago. The automatic rifles that were drawn on me then are pointed at America today. Yet President Barack Obama refuses to acknowledge that America is facing Middle Eastern guns.
With gold and silver hitting new highs, should we continue to buy?
Switzerland has always been among the countries with the highest gold reserves. Despite reducing its reserves in the past two decades, Switzerland still has the highest gold holdings per capita and its currency, the Swiss franc, has been among the top-performing currencies in recent years.