For central bankers, gold's safe-haven status has never looked better
Wall Street pundits and investors are schizophrenic about
US assets . The dollar weakened after Moody's cut the United States' credit rating, citing the
increasing fiscal deficit , as well as the rising interest costs on government debt.
On the other hand, the S&P 500 not only recovered after US President Donald Trump's
April tariff shock , but is now less than 5 per cent off its record high in February. Nevertheless, 30-year US Treasury yields recently exceeded 5 per cent per annum, indicating investors' nervousness about US deficits and debt sustainability.
While Financial Times columnist Martin Wolf worries about Trump's assault on the US dollar, he and
others argue that there is no suitable alternative to the dollar. I beg to disagree.
Wolf listed some alternatives, such as replacing the US dollar with the
Chinese renminbi or the euro, a world with multiple competing currencies or continuing the dollar status quo. Wolf also mentioned the possibility of a global currency or even a cryptocurrency-based world, but dismissed both as inconceivable. I agree that fiat currencies are not serious alternatives to the dollar, since the euro is a weak second; the Japanese yen and renminbi are not even close contenders.
A global currency, perhaps based on the
International Monetary Fund's special drawing rights , is a pipe dream. Rival powers are unable to agree on a global central bank. The US has a de facto veto on any IMF reforms that would allow for expanded special drawing rights. And even though cryptocurrencies have reportedly reached US$1.5 trillion in market value and bitcoin rose above US$100,000 after the tariff shock, most people would not be able to access cryptocurrencies if a world war breaks out and
internet cables are cut.
If we cannot trust human governance of any monetary system, the only other historically safe store of value is gold.
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And while protests sometimes break rules, they may not be disruptive or harmful enough to merit responding with force. Aggressive displays of force, in fact, can heighten tensions and worsen situations. Conversely, research shows that if protesters perceive that authorities are acting with restraint and treating them with respect, they are more likely to remain nonviolent. The shooting at Kent State demonstrated that using military force in these situations is an option fraught with grave risks. Brian VanDeMark is professor of history, United States Naval Academy This article is republished from The Conversation under a Creative Commons license. Read the original article.
