We’re big fans of a couple of phrases here at Markets and Money: “I told you so” – which doesn’t happen nearly often enough, and “if only.”
The latter we find ourselves lamenting all the time…“if only” Nixon hadn’t cut the lifeline binding U.S. dollars directly to gold, maybe greenbacks wouldn’t look so anaemic today. Or “if only” America hadn’t burned up all her oil, maybe we wouldn’t face the prospect of USD$5 gasoline this summer.
The days of the dollar being backed by more than a wink and a smile, of course, are long gone.
Meanwhile, world currencies with an ipso facto energy “backing” are doing very nicely…even as the purchasing power of the U.S. dollar collapses. Take the British Pound.
Lots of factors sent it soaring. But with energy in short supply, England’s vast share of the North Sea oil riches look almost as good as the gold-backed greenbacks of yesteryear. The same goes for Norway’s Krone… Canadian dollars, backed by Alberta fields and oil sands… even Australian dollars, backed by vast stockpiles of coal, gas, and – of course -uranium.
It came as no surprise to us that the world’s biggest investors have hedged their money by shifting cash into these foreign “energy-backed” currencies. It’s hardly the newest trick in the book. Or the craziest.
Markets and Money