Asia Between A Rock And A Hardspot Part - VIII

December 15, 1997

If aggressive young Asians had only listened to their ancestors: "GOLD is the only money which retains its value over time!"

It was the infamous Nazi propaganda minister once who said: "The bigger the lie and more oft pronounced, the more it will be believed as the truth!" Western politicians aided and abetted by the Central Bank lackeys they appoint have for a few years been carping and harping that: "gold is no longer a monetary asset; gold is no longer an inflationary hedge; gold ceases to be refuge and protection against economic uncertainty and currency chaos." My very considered opinions of their spurious remarks are RUBBISH, RUBBISH AND MORE RUBBISH!

The history being painfully forged daily in Asia totally belies the mis-leading statements made by politicians and their Central Bank lackeys. It all began with a sudden bang when Thailand's baht currency was hit by a massive attack from speculators who decided Thailand's slowing economy and political instability meant it was a time to sell. Subsequent currency chaos spilled over into Malaysia, forcing its Central Bank to intervene aggressively to defend the ringgit. Ensuing contagion put the Indonesian rupiah and Philippine peso under fire. Understandably, the currency meltdown spilled over into each country's stock market, causing share prices to be mercilessly pummeled. The downward spiral of currency turmoil and stock market bloodbath began feeding on each other. Then the biggest domino to date fell: Korea, heretofore the world's 11th largest economy. Market and currency disarray quickly converted to havoc, leading to a banking crisis in each country - but by far the worst conditions existing in Korea.

During the last five months nearly all individual and institutional investors watched in stark panic - as their savings wasted away DAILY before their eyes. Their savings were and CONTINUE TO LOSE VALUE DAILY due to stock prices being pounded down, and a relentless loss of value of their paper currencies. If only they had heeded the wise lessons of their elders and history: GOLD over the long-term retains it value, and is a refuge in times of currency chaos, stock market turmoil and banking crisis. This begs the question: IS GOLD A REFUGE TODAY IN THE financially chaotic disorder of South East Asia? Even the most fanatical anti-goldbug CANNOT refute the graphic evidence that follows, demonstrating beyond any shadow of doubt that GOLD IS AND WILL CONTINUE TO ECONOMICALLY PROTECT those Asians with sufficient common-sense to see the wisdom in their history.

Gold's Value in Asian Currencies

The following five charts show the daily value of gold in Thailand's baht, Indonesia's rupiah, Malaysia's ringgit, Philippines' peso and Korea's won. We used as a starting date March 15 (Ides of March) of this year to establish gold's stable price before this crisis all began. The last posted gold price value is December 11, 1997.

Just a cursory glance at the five charts clearly demonstrate that any Asian investor would have saved himself a significant amount of material loses and unnecessary grief by having converted his funds into the yellow metal.

During the last five months of currency chaos and stock market havoc - both which continue as I speak - a citizen of each country, who had the foresight of converting his currency into GOLD, would now be counting an increase in his portfolio value as per the following:

Philippines peso:
Malaysian ringgit:
Thailand's baht:
Indonesian rupiah:
Korean won:

+31%
+31%
+40%
+63%
+63%


It's evident Southeast Asian GOLD value increased by an average 45% in their currencies.

 

 

 

 

Even the most mathematically challenged observer must admit that NO OTHER investment vehicle offered more financial protection and monetary shelter, and INDEED exuberant capital appreciation than the shiny yellow metal... especially amidst currency and stock market turmoil and chaos. Banks teetering on bankruptcy offered little assurance to the investor. And the ever shadowing threat of the Bank of Japan dumping US Treasuries inspired little financial confidence to the gun-shy saver.

Asia's Only Safe Harbor Is GOLD

Consequently, GOLD IS AND REMAINS THE ONLY SAFE HARBOR for citizens of the Philippines, Malaysia, Thailand, Indonesia and Korea! Here's the reason why. Firstly, it is NOT YET public the total extent of Korea's economic and banking problems. Well-informed sources are now saying the IMF's $57 billion rescue package is grossly inadequate... most likely it will eventually require $100 billion to $150 billion to cure Korean woes. Where is all the money going to come from? Therefore, it is quite evident to most informed analysts the currency chaos and stock market crisis are just beginning -- where it will get a lot worse before it gets any better. If GOLD continues to rise at the same rate in local currencies, we are looking at an additional appreciation of about 50% within the next six months. However, since most markets usually go to excess at the very end of any move, this observer would NOT be amazed to see the GOLD value in these currencies explode by at least 100% during 1998.

The dire ramifications of the Domino Effect are just beginning. All southeast Asia is inextricably and economically involved with Japan... especially the Nippon banking system. The former Asian "Tigers" will eventually fall economically and financially, pulling down Asia's largest domino: the Land of the Rising Sun. As this occurs more astute and sophisticated Japanese investors will invade the GOLD market bidding the yellow to IRRATIONALLY EXUBERANT levels. We must all remember the Japanese have MANY hundreds of billions of dollars in savings. And the Japanese investor has been suffering a bear market in stocks since 1990. Furthermore, there is a total loss of trust in the securities industry which is riddled with scandal of gangland payoffs. There are runs on a rapidly weakening banking system. Insurance companies are beginning to crumble. Rumors increase daily that the BOJ will be forced to dump its hoard of $310 billion in T-Bonds. This would precipitate divesture of another reported $300 billion in US Treasuries held by individuals and private financial institutions. Interest rates would soar worldwide.

An explosive Asian demand for GOLD is looming on the horizon. And no Central Bank nor international interested groups will be able to mitigate the deluge demand for the yellow metal by the Asians.

All Asians are indeed between a rock and a hardspot. Fortunes are destroyed daily though continuing currency devaluations and stock market hammering. Those Asians cognizant of their history will be saved... the rest will become victims of the Domino Effect.

... eventually the Domino Effect will reach ALL shores

A one-ounce gold nugget is rarer than a five-carat diamond.

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