Certified Gold As Hedge Against Posted by James Randolph on February 16, 2010
February 16, 2010 – Amid the concerns of the Greek debt crisis, economists are starting to warn of a looming soft default by the United States, with many seeing certified gold as a financial hedge against such a condition. The Greek economy is overwhelmed with more debt than its revenues can sustain, leading Eurozone chairman Jean-Claude Juncker to state that Greece’s debt crisis is "first and foremost a Greek problem and an internal Greek problem."
As the European Union fumbles with a solution to the problems in Athens, economists are starting to return their focus to the US economy, realizing that the American government has created a situation with its budget deficits that is eerily similar with the Greeks. The situation is serious enough that Morgan Stanley analyst Spyros Andreopoulos has said of the United States’ long-term budget deficit, "While hard default is inconceivable, soft default through inflation is a clear risk."
Soft default is interpreted as a government using inflation to devalue its currency, thereby making foreign debts less costly. This brings a stark reality to both investors and economists. If the US cuts its annual fiscal deficit from 9% to 5% of the US economy each year from now until 2020, Andreopoulos writes, "Stabilizing the debt at current levels would then require an inflation rate of 9% on average over the next 10 years." Talk of inflation becomes key for certified gold investors.
Inflation has historically been a good time for certified gold investment. As the value of the dollar falls, the value of gold generally rises; this has been seen during the Greek crisis as gold has rebounded strongly against the euro. If inflation is imposed on the US economy, the same thing would likely happen here as well.
Talk of inflation fighting measures has already been started by the Federal Reserve and Congress has mentioned a possible default in the fall if budget concessions are not made. Investors should look to move into certified gold positions with prices still near their cyclic lows and before the talk of a possible soft default hits the mainstream media.
Senior Staff Writer – Certified Gold Exchange