Currency

[andrewducker]

Yesterday I was asked by octopoid_horror "What currency -is- now the safe option...? Is it the Euro? Yen? Or do we all go back to putting everything into gold?"
which elicited the following response:

There has never been a safe long-term currency.

Dollars were the safest from after the 70s oil-shock until the necons got hold of the budget. Nowadays the Euro is stable, with the Yuan having the most possibility over the long term. Sensible investors will avoid the Yuan for mid-term investments because frankly their system of government isn't reliable. They could decide tomorrow to abandon the move to capitalism. They'd be stupid to do so, but they _could_, because they're so autocratic. This makes people nervous, as does their government being so opaque. Also, their capital controls are nowhere near strong enough, and I don't trust their stock market valuations as far as I could throw them. Huge possibilities, lots of danger for careless investors.

The Euro is frankly liable to be stable for the next while because the EU isn't high growth, but is managing to avoid making too many bad decisions at once, and has different countries pulling in enough different directions to keep them fairly central.

If I was holding currency reserves I'd have 70% in Euros for stability, with 30% in pacific rim countries best placed to take advantage of China's growth.

Oh, and obviously I wouldn't trust Russian money in the slightest. Frankly the whole of the ex-USSR is being held together by sheer force of will right now, and the second a power struggle kicks off it's all going to fall apart. Putin's doing well enough, and has strong supporters that realise that the price of destabilising the country isn't worth more power, but all it's going to take is one mad idiot and it's all going to go to hell. Frankly the country is too large to be governed centrally without cracking down on dissenters brutally.

Comments

[cybik.livejournal.com]

Sticking with gold (or silver or platinum) isn't actually a bad idea..

[andrewducker]

Gold's a pretty good investment over the last while, but the price has varied considerably over time. It's currently doing very well largely because India is doing very well, and they have a cultural thing for Gold. When you get down to it, it's a pretty chunk of metal, its price dependent on all the same things other items are. It's certainly not something you'd want to base your actual currency on.

[cybik.livejournal.com]

Well, no, not on the large scale and the general lifespan of people. But gold has been of value for the last few thousand years and I suspect will be for a long time to come. So if you're immortal it's a great idea.

There's always art, but that's a tricky market..

[andrewducker]

Doing very well at the moment, due to the influx of multi-billionaires pushing up prices at the top end.

But yeah - knowing what to buy, and holding it for the right period of time, is very tricky.

[fetket.livejournal.com]

urm.. gold has plummeted in real value over the last 50 years... And don't trust the Yen it's contantly going up slihgtly then down slightly more.

To be honest you want large population base and unpunished growth, which leaves basically the euro as the safest bet.

Now I just need to get my brain around the tax problem of investing in the Euro.

[octopoid-horror.livejournal.com]

Guess which central bank sold all their gold reserves at the lowest price point for some decades and, had they sold them a couple of years later, they would have made nearly double?

Here's a hint "Bank of England"

[drplokta]

There is still a risk of one or more countries coming out of the Euro, with the chaos that would ensue.

The simpler rule is to keep your savings in the same currency as you plan to spend them in. This at least insulates you against exchange rate risk, if not inflation risk.

[andrewducker]

Oh, I meant purely for investments. Myself and Mr Horror both work in international financial companies and tend to have conversations about investments and international politics.

While my code is compiling, of course :->
http://xkcd.com/303/

[lizzie-and-ari.livejournal.com]

What is it you do Andy?

I realise I should know this.

Something technical for a company somewhere.

Lxxx

[andrewducker]

Ask me tonight at writing group, I don't talk about my beloved corporate overlords on my journal.

[lizzie-and-ari.livejournal.com]

Wow you're a spy aren't you?!

Alas I won't be at writing group tonight as I have a gig in Glasgow. If I'm on first and get a quick train I might get the chance for a cuppa with everyone at the end (it's at Hazel's, isn't it?) and then you can tell me all about MI5)

Lxxx

[andrewducker]

(but yes, something technical for a financial company)

[andrewducker]

Do you think there's a high risk of any country leaving the Euro? I know it's a possibility, but I hadn't thought of it as a high one.

[drplokta]

There are continual mutterings about Italy, which really needs to devalue its currency but can't.

[fetket.livejournal.com]

Given italy's history there is a good chance the population would vote down any government that too them out of the Euro. From what I can understand they've faced hyper inflation three times in the last 100 years and never want to face it again.

[drplokta]

It wouldn't necessarily leave voluntarily. I could see a situation where it was a choice between Germany pulling out or Italy being thrown out for repeated breaches of the stability pact.

[guyinahat.livejournal.com]

While the Dollar is weak at the moment, I wonder how much more it is likely to drop. If it's through with plumetting, then it might not be a bad bet after all.

Some of my inspiration is the current state of banking stocks. They're horrific pretty much across the board, so 'some' can only go up. Question of the moment is which ones...

[andrewducker]

Except that several economics articles I've read indicate that the dollar has a way to go yet. Their economy is heavily in debt and being propped up by heavier growth economies buying dollars (i.e. China and the rest of the pacific rim). The US is borrowing a huge amount of money, and at some point _someone_ is going to stop lending to them, at which point the whole house of cards comes crashing down.

Now, if they were sorting out their economy, and trying to balance their deficit, then they might be able to pull off a soft landing, but that's not looking so likely right now. If OPEC switches to euros, or China announces that it's not so fond of the trillion or so dollars it's currently holding then the sub-prime crisis will look like a day in the park.

[drdoug.livejournal.com]

If it's through with plumetting, then it might not be a bad bet after all.

Ah, the bear-market dilemma. "Never catch a falling knife", as the saying goes.

[octopoid-horror.livejournal.com]

I could make some semi-educated guesses about which ones will go up, and it's the obvious ones.