If you’ve studied John Exter’s liquidity pyramid, you’d likely know that US dollars aka Federal Reserve note$ in hand are one of the most liquid items you can own.
Demand deposits with sound financial institutions in functioning markets perhaps a close second, t-bills a third.
Physical bullion in hand, is the pinnacle of the inverse liquidity pyramid of course (see below).
In short, when everyone wants their money back, owning the things at the bottom of the inverse pyramid is typically best.
Long term gold bull, Santiago Capital’s Brent Johnson, has been arguing for many years that recently building emerging market US dollar debts, etc. would bolster said fiat’s purchasing power vs other fiats, in the coming 12 to 24 months.
His take in a nutshell, is the USD will gain further strength vs other currencies in the next year to two, then likely give way to rising bullion values.
Dude claimed to have bought gold bullion yesterday.
I presume you’ve got over a 1-2 yr timeline for that bullion.
With piles of USD cash waiting on the sidelines, we’ll see how much value it yields in the next major crisis. I expect some will get frozen or be illiquid for a while.
— James Henry Anderson (@jameshenryand) August 3, 2018
Brent’s USD thesis is summed up further in a longer video he recently produced below. Don’t let the silly David Bowie / Freddy Mercury screen cap fool you.
His recent video update is worthy of some consideration. For if the USD’s DXY blows past 100, precious metal spot prices could be under further duress to close this decade.
About the Author
James Anderson has a BA in finance from Loyola University New Orleans. He has both worked and invested in the physical investment grade bullion markets prior to the 2008 global financial crisis.