Zero for growth, yield, velocity and confidence: We believe there are nearly zero real options available to global policy-makers. The world needs growth and is willing to go to extraordinary lengths to get it. This is creating distortions where old rules don’t seem to apply and where investors face a number of paradoxes.
Golden prospects: We believe the macro-economic environment for gold is once again turning more positive and forecast prices to exceed USD2,000/oz in the first half of 2013. We believe the growth in supply of fiat currencies such as the USD will remain an important driver.
Gold as Money: We describe the gold vs. fiat currency debate from theperspective of Gresham’s Law. To describe it in the simplest of terms, gold’s value depends in large part on the degree of ‘badness’ of bad money. This lends a certain art to the science of forecasting gold prices.
When one has accumulated too much debt, while the right thing to do is pay it back, the easiest thing to do is default and hope your creditor has a short memory. We believe the Western economies in general are biased towards the latter, whether they will admit it or not. We expect a soft default will likely be the preferable course of action; a managed form of currency depreciation through various stages of Quantitative Easing or successive bailouts by central banks of the banking system.