Where to from here?

So much seems to have happened this week, but there are certain events that stand out:

The Federal Reserve stunned the markets on Wednesday by announcing that it would buy $300bn in long term government securities and another $850bn of securities issued by Fannie Mae and Freddie Mac.

To further stimulate the economy the Fed said it would buy up to an additional $750bn in agency mortgage-backed securities, bringing its total purchases this year to $1,250bn.

The immediate response of this shock move was to send the Dow Jones up, but also the dollar fell sharply against the Euro as the European nations at the moment are resisting taking such drastic actions as the USA.

There is a meeting of the G20 countries scheduled for April 2nd. Russia has proposed the creation of a new reserve currency, to be issues by international financial institutions, among other measure in the text of its proposals to the summit. China and other emerging nations back Russia's call for a discussion on how to replace the dollar as the world's primary reserve currency. What you can expect to see during this meeting will be the major governments finding ways to change the existing rules and to propose unconventional and new methods of getting us out of this crisis. There is a sense of desperation in the air as despite the amounts of money being given for bailouts of the banks and various industries, nothing is really making a dent in the speed with which economies round the world are contracting.

In the UK, there were over 4000 applications for a single janitor’s job. In the US, there have been demonstrations in several major cities about various taxes and the inequalities in the financial systems. In France there have been huge national demonstrations where over one million state workers have been out on strike. Gradually we are going to see more and more uprisings around the world. The people are not going to sit down quietly and take losing their jobs, their pensions, their homes…..while food prices have increased over 18% this year in most developed countries. That isn’t even mentioning the poorer countries who of course, are hit even harder.

What is going to happen? When will this all end? These are frequent questions that my clients and friends ask me. Here are my predictions:
I think that there will be considerable strife and discontent, especially in the major cities and we will see more violence as people find that they have nothing more to lose.

The US dollar will no longer be the reserve currency of the world. A new currency will be created – possibly a global one, or a mixture of one that includes the USA, Canada and Mexico as a bloc, Europe and some Asian mix.

Complementary currencies will become the norm and we will no longer rely on national and international currencies for all our trade and transactions.

The price of gold will soar to over USD$2000 per ounce.

People will start to come together in smaller more sustainable communities where food is grown locally and services are exchanged in the local currency.