Germany's largest bank has published an amazingly frank rapport on the prospects of global markets and the future of gold. Although reading it might make you pessimistic, we can't help the fact that some experts working for major financial institutions are finally waking up and smelling the coffee.
Quote:
"Certainly extremes in leverage in the Western economies and
questions regarding growth in China present investors with a
worrying post-2012 future.
However, in our view there are nearly zero real choices available to global policy makers. The world needs growth and it 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 disturbing paradox:
- Those who are right are likely to be wrong
- Those who lose, often win
- Those who are imprudent can be rewarded
- Dumb money can win
In the first instance, we believe investors are right to worry;
the imbalances in the global economy are extreme and need to be
urgently addressed, proactively. This is unlikely however, making a
necessary future adjustment likely to be involuntary and therefore
unexpected. Those who are right are likely to be wrong for a
considerable period of time.
In the second instance, as has been witnessed over the past
several years; those who risk and lose, often don't in fact
lose. Loss-makers are compensated by a system that is unable to
tolerate the consequences of failure. Moral hazard continues to be
encouraged.
In the third and fourth instance we point out that those that have
borrowed too much, those who have been negligent in managing their
own personal finances are not likely to suffer the bitter
consequences of such folly. The financial system in fact remains
oriented to encourage further leverage and risk-taking. It is
better to be a debtor than a creditor.
It seems that the 'smart' money needs to adjust for the
irrational or emotional characteristics (and therefore poor
predictability) of the current economic environment. This makes
investment simpler in the sense that one only needs look to what is
'easiest' rather than what is 'right'."
The study goes on to confirm gold as money and supports the idea
of having a gold standard. Furthermore these commodity-strategists
expect the price of gold to exceed $2000 an ounce in the first half
of 2013. A very interesting read (PDF).
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