While we don’t often think of money as a commodity, in reality, that’s precisely what it is – a commodity that goes up and down in value as the demand and supply of the currency changes.
As Canadians, most of us should realize this fact, as we see the value of the Canadian dollar change on virtually a daily basis – this reality affects all the other currencies on Earth as well.
Money has also been described as a “nervous” commodity – a commodity that reacts, strongly, to political, social, economic and political circumstances on a rapid basis.
When the owners of money get worried about the value of the money they hold, we often see what’s called a “flight to quality”, whereby the money owners want to sell off the currency they have and replace it with something perceived to be of higher quality (and less likely to go down in value).
Sometimes, this flight to quality sees money owners switching to other currencies they view as more likely to hold their value (the Swiss franc happens to be one of these “safer” currencies – but depending on world conditions, other currencies are also purchased).
However, when money owners fear all currencies (which often happens), then they try to move their wealth into other items deemed to be more stable. Gold and silver are very popular during turbulent times, but investors also go into stocks, bonds, and “futures” contracts, among other items.
My point in discussing this is simply to point out that money is a very nervous commodity, and when markets become concerned about currency values, there is a massive shift of wealth into other items.
This is important to understand, now, as I believe we will soon begin to see markets becoming very nervous.
Until now, U.S. businesses have generally dismissed the socialist “wave” that has been sweeping across much of that nation.
This is understandable, as America would appear to be the last place in the world that would adopt socialist values.
America, after all, just about invented capitalism, and this capitalist agenda turned the U.S. into the wealthiest nation in the world.
However, the rhetoric about socialism is picking up, quickly, in the U.S., and the latest elections south of the border saw a number of well-known socialists win seats in the U.S. House of Representatives and the U.S. Senate.
With many of these new socialistic congressmen and senators talking about “taxing the rich”, it’s only a matter of time before the owners of money start getting nervous (in fact, some of them already are).
As these fears spread, many of the wealthy will begin to view the U.S. as a place that is no longer “safe” for businesses and for money – a view that will lead them to start selling assets that are in the U.S. and can’t be moved to safer, foreign shores. Of all the assets in this group, real estate is the single biggest item.
As the nervousness spreads, real estate will quickly get dumped, as will stockpiles of U.S. currency, U.S. stocks, U.S. bonds (both commercial and government issued), along with any other U.S.-based assets that are considered “liquid”.
Individual and corporate losses will grow, quickly, and the value of American-based assets will decline dramatically.
Businesses will close, jobs will be lost, companies will find it difficult to borrow money to keep their firms operating, and once this snowball starts rolling down the hill, the damage increases exponentially.
I believe it’s time we all start paying attention – there are many ways to make big money in times of crisis – and start learning these ways, now.
Brian McLeod is a St. Albert resident.
