Like you, I believe that the future will bring a much stronger dollar, but that will be good for gold. My reasoning is simple. There are an estimated $9 trillion of dollar borrowings by foreigners as as the dollar strengthens vs. their local currencies the cost of servicing this debt will soar and that will bring bankruptcies that will undermine confidence in debt instruments. Bottom line, we have a gigantic short in the dollar and if the dollar soars, that will have dramatic consequences in the financial markets. Under such circumstances debt (usually thought of as a safe asset) will become suspect, risky, leaving gold (the only liquid asset that is not someone else’s liability) as the remaining safe asset. I would also note that all deflations ultimately end with a revaluation of the price of gold.
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Like you, I believe that the future will bring a much stronger dollar, but that will be good for gold. My reasoning is simple. There are an estimated $9 trillion of dollar borrowings by foreigners as as the dollar strengthens vs. their local currencies the cost of servicing this debt will soar and that will bring bankruptcies that will undermine confidence in debt instruments. Bottom line, we have a gigantic short in the dollar and if the dollar soars, that will have dramatic consequences in the financial markets. Under such circumstances debt (usually thought of as a safe asset) will become suspect, risky, leaving gold (the only liquid asset that is not someone else’s liability) as the remaining safe asset. I would also note that all deflations ultimately end with a revaluation of the price of gold.