By: Lisa Oake
As the investment world eagerly awaits more stimulus, a debate on a previously unthinkable topic has started to emerge – can fiat currencies survive round after round of debasement?
 |
Some heavy hitters say the answer is no.
A
fiat currency derives its worth from the issuing government - it is not
fixed in value to any objective standard. That means central banks can
print as much money as they want. If an economy is struggling,
injecting more notes into the system juices activity but lowers the
value of the currency in question.
With
major central banks all desperate to stimulate their economies, some
say currencies have entered a dangerous new phase often described as a
race to the bottom.
Mark
Mobius, Executive Chairman of Templeton Emerging Markets Group, says
investors will soon start to demand fiat currencies be backed by gold or
other hard assets.
“It's
already happening, you're beginning to see that trend with central
banks stocking up on gold. The estimate is that at least half of the
buying is central bank buying. They are looking to the day when they can
say okay, our currency is backed by gold and therefore we're a strong
country,” Mobius told CNBC Asia.
Mobius has $50 billion under management.
Yu-Dee
Chang, Chief Advisor at ACE Investment Strategists, says repeated
stimulus is shortsighted. “If you keep printing money, sooner or later,
we're going to get in trouble. QE is good for the economy and for the
market but the long-term effect is very much questionable,” said Chang.
As the fiat currency debate gains momentum and relevance, one London-based manager of a billion dollar fund says the answer about what lies ahead is in the past.
“Every single fiat currency in history has collapsed, this time will be no different.”
http://www.cnbc.com/id/48349503
No comments:
Post a Comment