Reminder: Nearly all currencies go to zero ...Middle East

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Reminder: Nearly all currencies go to zero

This is an interesting chart from Deutsche Bank today that is a great reminder of the long view.

The first thing that stands out is the outperformance of the Swiss franc and what DB attributes it to:

    Until 1999, the SNB was constitutionally mandated to hold at least 40% of its reserves in gold and even though this was subsequently abandoned, they have maintained a notable holding as part of their reserves. No other economy has come close to such policy, although the Bundesbank continues to hold more gold than any central bank other than the Fed, and between 1971 and the introduction of the euro, this helped keep the currency strong, inflation low and allowed it to maintain strong PPP.

    The second thing that stands out is how few currencies have outperformed the US dollar despite the US abandoning the gold standard in this period. It's really only Japan and the strongest eurozone economies, which made the one-off move of transitioning the euro.

    But perhaps the biggest standout is the collapse of so many currencies on the list. This is far from a comprehensive list as it doesn't include basketcases like Zimbabwe but even among a list of decent (if not strong) economies, around half this list has been zeroed out.

    If you're investment horizon is +50 years, then there is no alternative then to factor in hard assets or other safe stores of value into your decision making.

    As a reminder, the US dollar has lost about 98% of its value against gold since August 1971, when it was trading at $35 per ounce and 50% since October 2022.

    This article was written by Adam Button at www.forexlive.com.

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