Is the Dollar a Zombie?

The title of this entry is the same as the theme for the spring meeting of the Committee for Monetary Research and Education (CMRE) in New York in late May. CMRE is an educational group made of economists, journalists, think-tank researchers, investors and others interested in the principles of sound money.

Given the possible ramifications of the massive sovereign debt loads in western Europe, a better title for CMRE might have been “Is the Euro a Zombie?”

Pessimism prevailed at the podium. Here’s a sampler from some of the speakers.

Market historian Bob Hoye: The people in charge of financial policy reform know little about markets. The stock market rebound from March 2009 low was, historically speaking, a classic bounce-back from a financial crash, and it had to come to an end. Senior gold stocks will see much higher value in the future, and the Dow will be much lower. Junior gold stocks in the future will be much like tech stocks of early 1990s – the big party for that sector is yet to come

Investment manager David Tice: There will be higher interest rates and lower standards of living around the world, and higher gold prices. The inflation vs. deflation debate is yet to be settled. The big question is “What happens when people no longer trust their money?”

Former U.S. Comptroller General David Walker: Government is too big, it has promised too much and it has waited too long to try to fix its problems. The U.S. can’t grow its way out of the current troubles, and it can’t inflate its way out. Reliance on foreign bankers (50 percent of U.S. public debt is held overseas) is not in the nation’s long-term interest.

Heritage Foundation’s Bill Beach: Many governments enjoy creating dependent populations, and part of the dependency culture in the U.S. is that a high percentage of the population pays no federal taxes. This percentage is rising. To pay for growing entitlement programs, the U.S. government will likely turn to more deficit spending in the medium term and much higher levels of taxation in the longer term.

Barron’s columnist Jack Willoughby: The European monetary union can’t hold over time because there is not enough political integration in the eurozone. The U.S. is heavily exposed to the euro crisis through hundreds of billions of dollars worth of currency “swap lines” that the Federal Reserve made available to Europe.

Now I’m not necessarily endorsing any of these viewpoints, but they are well-thought-out by experienced observers, and they are worth offering up for discussion to a broad audience.

About Frank Holmes 263 Articles

Affiliation: U.S. Global Investors

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure.

The company’s funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper’s top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper’s top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories.

Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of “The Goldwatcher: Demystifying Gold Investing.”

He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies.

Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron’s, The Financial Times and other publications.

Visit: U.S. Global Investors

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