Investment World Outlook

The greatest transfer of wealth in the history of the world is well underway. Yet we hear little about it from our TV talking head “experts” or politicians. Has our political system become so corrupt that no one in power has the guts to speak the truth? Probably

The wealth transfer is taking place because of two mega trends. The first is the high cost of oil and other raw commodities that net consumption nations like the US are forced to pay in the highly competitive world marketplace. When you have a habit of always consuming more than you produce trouble is sure to follow. Money can not flow out of a county to pay for it’s over consumption habits forever. A day of reckoning will eventually take place.

A serious effort at energy conservation and placing funds into savings accounts rather than immediately spending more than you make seem to be impossible for most Americans. But than the people are encouraged to indulge in unwise behavior by the nations “spend your way to prosperity” nonsense put forward by the nation’s politicians. Evenually the people will realize that they have been grossly mislead by their leaders. You can not hide a falling standard of living for long.

The second mega trend affecting money outflows from the US is that the trade and fiscal imbalances (deficits) being accumulated are totally out of control. Never in the history of the world has a nation been able to truly prosper when money flows are net huge outflows. The US has been able to sustain such imbalances so far only because the US Dollar enjoys a unique position as the premier reserve currency in the world. However this privileged position will not persist forever.

While the process of financing American debt is a complicated one in effect the thifty poor people of the world save at high rates and then lead funds to the United States where over the past few years people spend more than they make. The US currently borrows about three billion dollars a day just to be able to keep on going. This is clearly a dangerous and unsubstainable process.

The transfer of wealth to entities outside of the US weakens the ability of the US to compete in world markets as it’s financial position weakens and it is unable to finance an expansion of it’s manufacturing base at competitive rates. It is a fools paradise to think that a service economy can long survive near or at the top of a competitive world. True wealth is made by nations that produce goods that are in demand.

With the two mega trends mentioned above well underway the risk that foreign nations will take measures to reduce their dollar exposure is more than a worry. Nations are quietly adjusting their own foreign exchange holdings to reduce the amount of Dollars held by their treasuries. At some point the risk is that the Dollar will go into a rapid free fall, which would destabilize economic growth worldwide and cause economic hardship for many millions of famlies.

As wealth continues to be transferred from high consuming nations to surplus oil and commodity producing nations the outlook for world peace is not encouraging. Wars have been fought over far more trivial matters than decreasing standards of living amoung lower income and middle class families of a proud nation like the US.

And how might all of this mega trend business effect your own investments? Certainly you should take steps to reduce your own US Dollar exposure. Perhaps you should take a look at forex investment. Owning resource rich backed Canadian and Australian Dollars is a good bet.

Cashing out of the stock market and real estate market near all time highs is likely a very good idea. And controling your own spending a debt is always a great idea as it gives yo more money to invest.

Then we come back to gold. An all time high in that market is likely a few years away. In my opinion every investor should have some gold in their investment portfilio. Just in case things get really rough over the next several years.

Gerald Greene
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