When virtually every global financial institution is exposed to one other in today's world of free flowing capital markets, where do you hide when bankrupt borrowers like Greece default?
Certainly not in French banks, which have lost almost half of their share value over the past year due to their Greek exposure. And if French banks go down, the country's credit status could get downgraded.
That would not be good news for German taxpayers, who, according to the terms of the Eurozone's Stability and Growth Pack, would have to shell out an even bigger share of the mounting costs of the bail-outs for the PIIGS (Portugal, Italy, Ireland, Greece and Spain) than they are already shouldering. With German taxpayers frustrated at sending so much of their good money chasing bad, they are unlikely to want to open up their wallets any more than they already have.
Until the Euro loses its PIIGS, it is going to remain a troubled currency, with growing dissention among the ranks of the 17 member monetary union.
But across the Atlantic, the U.S. dollar is no more attractive a sanctuary from the shockwaves reverberating around global debt markets. The U.S. banks are not vulnerable to the contagion effects of a debt default by the PIIGS but Washington has some major league debt issues of its own.
The fact that so much of America's debt is now foreign-owned makes devaluation of the U.S. dollar intrinsically appealing to the U.S. Treasury.
That leaves gold, which once again becomes the de facto global currency and the safest sanctuary from the risk of sovereign debt defaults. For all intents and purposes, gold has become the other side of the trade for everybody who wants to bail out of U.S. dollars.
What makes gold so appealing in today's unsettled currency markets is unlike the Japanese yen or the Swiss franc, which saw their country's central banks quickly push back when their currencies were getting too strong for their economy's liking, gold has no one central bank to lean against the wind.
As well, gold has no export sector upon which the livelihood of millions of workers depends upon the competitiveness of their exchange rate. In today's world of faltering economic growth and rising unemployment, these are admirable qualities for a currency or, in this case, a surrogate currency to hold.
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Gold is essentially a dogmatic fall back position. We think it's currency because our parents thought it was currency. Sort of like religion. It may be, and has been so far this year, a good investment position. However one of my firm beliefs is that gold has almost no intrinsic value to society. It's a philosophical position more than anything. I have no respect for people who sing the virtues of gold. From a labor standpoint, almost every person mining gold is useless to the world. I would rather hold something useful like aluminum or iron if I really wanted to hold a commodity.
Well, then there's the problem of where to put it. For small investors (which most of us are), safe's cost as much as the gold, and fees for bank storage drain the value of the investment.
And, should the real concern come to pass (End of Life as We Know It), land will matter more than gold, and food as much as land. Imagine paying one ounce of gold for a ham sandwich because you're starving.
But it's pretty.
see "The World’s Surest Gold Vault" http://www.unexpectedutility.com/investing/the-worlds-surest-gold-vault
Dictionary.com says:
mon·ey   [muhn-ee] noun
1. any circulating medium of exchange, including coins, paper money, and demand deposits.
Wikipedia says:
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past, a standard of deferred payment. Any kind of object or secure verifiable record that fulfills these functions can serve as money.
Please, please, please learn more about what money is and how it is made.
http://en.wikipedia.org/wiki/Money
http://www.youtube.com/watch?v=swkq2E8mswI
Gold is backed by a COLOR and nothing more.