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The reality of inflation and gold bullion investment.

January 17, 2011 – Gold bullion is filling safe deposit boxes across Europe as the sovereign debt crisis is showing no signs of reversal. We all should pay attention to that because our turn is coming.

With all of the attention on Europe the dollar has been holding on fairly well, but it can’t survive on former glory forever. In fact it is astonishing that “Western credit ratings agencies . . . [slapped] their good housekeeping AAA seal on some of the most toxic bond sludge Wall Street could concoct,” said Matt Phillips in the Wall Street Journal’s MarketBeat. "The view of markets is that the U.S. will continue to benefit from the exorbitant privilege linked to the U.S. dollar. But that may change," says Carol Sirou, head of Standard & Poor's France, in the Wall Street Journal.

It already has changed, right after QE2 was announced when China’s first domestic credit rating agency, Dagong Global Credit Rating Co. downgraded its US rating from AA to A+, citing “serious defects in the U.S. economy [that] will . . . fundamentally lower the national solvency.” Because China is the largest holder of US foreign debt we shouldn’t take that lightly, but the markets completely discounted the report.

Perhaps they will sit up and take notice when S & P and Moody’s lower our rating. That could happen sooner than one might think. According to a senior analyst at Moody's, “the likelihood of a negative outlook over the next two years will increase." Both firms have repeatedly warned that the government must reverse debt expansion to avoid downgrade, but amazingly the Washington steamroller rumbles on. When our ratings drop, interest on our debt will rise and inflation will be certain to follow. That’s just plain reality, as is gold bullion’s ability to protect you from it.

Daily Updates Archive

Jonathan Monroe

Senior Staff Writer -

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