Why today’s investors must think globally

History reminds us that no nation ever pays off its debts outright, and that all government debt is eventually – and inevitably – inflated away.
It may be quiescent for now, but to ignore the time-bomb of inflation is to do so at one’s own peril. It’s a risk that could well be reflected in an ever-rising gold price (currently over U.S. $1300 an ounce, and counting), as well as an ever-sliding (and cheaper) U.S. dollar.
The U.S. dollar, the world’s reserve currency, keeps on sliding despite the pressures on China to lift the value of its yuan and a growing groundswell of foreign currency posturing.
The latent inflation risk is another reason why investment strategies must remain focused on equities. Besides, it’s invariably better to be an owner than a debtor and to have interest (and dividends) payable to you rather than by you – and ever more so now.
Adding to the case for being an owner rather than a loaner is a global economy being slowed by the U.S. but offset by a burgeoning new world order led by Asia, Latin America, BRIC (Brazil, Russia, India and China) and other rising powerhouses.
There’s also China’s ever-lengthening investment clout, witness Potash Corporation of Saskatchewan contemplating a Chinese white knight to rescue it from the hostile (and underpriced?) clutches of BHP Billiton? It’s but one more example of why today’s investors must think globally.
In Europe there’s encouragement too, despite nation-wide strikes in France and intensified payback stresses in Greece, Ireland, Iceland and others.
In Britain, the determination of David Cameron’s new coalition government to get on top of its huge debt and deficit problems remains especially noteworthy. One respected English friend writes: “The majority of the British people know that the problem must be addressed now and will back the government against an overpaid, overprotected and quite often bone-idle public sector”. Another comments on how many UK companies have come through the recession surprisingly well and have sustained earnings better than might have been expected.