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

[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.