What is the soundest fiat currency right now?

[Anonymous]

Below commodities and Bitcoin, what currency is the soundest in its backing and future?

[grondilu]

Below commodities and Bitcoin, what currency is the soundest in its backing and future?

Jim Rogers advises to buy Japanese Yen, chinese RenMimbi (not sure about the spelling for this one) and Swiss Franc.

[S3052]

this depends largely on time horizon

1. Over the next months (my estimate is 9-18 months) the USD will be one of the strongest globally (except BTC)
2. After this strong USD rally, it will likely be what you outlined above: renminbi and CHF . I am less certain about JPY

[Veltas]

I still wouldn't put bitcoin under 'fiat'.

[Sjalq]

this depends largely on time horizon

1. Over the next months (my estimate is 9-18 months) the USD will be one of the strongest globally (except BTC)
2. After this strong USD rally, it will likely be what you outlined above: renminbi and CHF . I am less certain about JPY

Interesting, why do you expect this?

[S3052]

I still wouldn't put bitcoin under 'fiat'.

clear. BTC is not fiat, and will be stronger

[S3052]

This is based on technical analysis of the dollar index (DXY)

It already bottomed in 2008 and also made a mid term low in Nov '10, and is rallying since then.

There is at least 20% upside from here.

[markm]

Quote "Interesting, why do you expect this?"

Surely it is obvious? Currently Americans are riding the BitCoin wave, shortly the Chinese will catch on and get into a who can buy more bitcoin race with the Americans, then the CHF people will realise they'll look like idiots if they don't get in too; meanwhile the Japanese might exercise inscrutability.

-MarkM-

[ribuck]

Below commodities and Bitcoin, what currency is the soundest in its backing and future?

Any country with low government debt. There are even countries that have no debt and own sovereign wealth funds too.

If I wanted to hold fiat, I would consider Australian dollars. Central bank interest rates are not artificially low, at 4.5%. Government debt is tiny compared to the USA and Europe. There is plenty of land, and plenty of natural resources, for the population.

However, as is inevitably the case, the market has already priced this into the exchange rates, and the Australian dollar has risen enormously in recent years.

[bitdragon]

I do like my CHF more than most currencies but there is dear Norway with their sovereign money, and all foreign debt paid back by the late 90's. They are now a net external creditor of debt. That they get repaid is another story..

The Swiss National Bank has accumulated >200 billion euros to help lower the exchange rate EURCHF. Sounds like and is an awful investment.

The current account balance from the CIA is rather telling (https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html?countryName=Norway&countryCode=no&regionCode=eu&rank=5#no)

Norway listed in 5th position with a surplus of 60 billion. USA in position 190 with -561 billion USD 2010 est.
 
But this forex market is manipulated with outrageous leverage, and the USD can and probably will indeed still climb in the near future.

Not too easy to buy renminbi... exchanges here have a few though-

[markm]

Quote: "Any country with low government debt."

Someone on IRC calculated how much each so far existing bitcoin would be worth if the entire U.S. national debt were put into bitcoins.

But it seems to me they did not account for the incremental rise in the value of bitcoins during any actual process of putting that more than fourteen trillion dollars into the bitcoin economy.

Maybe whichever borrows the most to put into bitcoins would be the winner, and able to pay back all the debts easily once they have won?

-MarkM-

[Bimmerhead]

If by 'soundest' you mean the currency that will have the most value in the future I think that would be the one with the most demand versus supply, and thus increasing purchasing power.

On that basis I think the USD will do very well over the next 5 years.  If we're headed into another credit crunch (and I believe we are), and most of the world's debt is denominated in USD, then the supply of USD is about to collapse.  Even Ben B. can't print it faster than it collapses.

After all the bad debt is flushed out of the system though, watch out for inflation.

 

[caveden]

Any country with low government debt. There are even countries that have no debt and own sovereign wealth funds too.

That's not always a good indicative.
Take Japan for example. The government has a monstrous debt, but the central bank is quite conservative, they inflate very slowly. Prices in Japan have been falling in the latest years. Actually, one of the reasons the debt is so big there is because the government can't finance his enormous expenses with inflation, so it accumulates debt instead of monetize it.
On the other extreme there is China, the biggest lender of all governments, but with an inflationary central bank - since it follows US Fed.

You really have to look case by case...

If I wanted to hold fiat, I would consider Australian dollars. Central bank interest rates are not artificially low, at 4.5%.

That doesn't seem that high as interest rate... anyway, it's not the interest rate that counts, you have to look at the monetary aggregations, how fast they expand. For example, Brazil has really high interest rates, but that's because the central bank prints so often that the rates adapted to the price inflation. Swiss, on the other hand, has low interest rates, and that's not due to monetary expansion.

[markm]

Okay so lets have each nation whip up its own bitcoin app on its own favourite port. Now which's such digital currency looks best?

Would that be more about their implementation / code / mining infrastructure than about their current currency?

Or would their current relative position in the list based on current currencies simply port over to the digital form?

-MarkM-

[ptd]

After all the bad debt is flushed out of the system though, watch out for inflation.

Explain, inflation is the process that flushes the debt out of the system.

[Bimmerhead]

After all the bad debt is flushed out of the system though, watch out for inflation.

Explain, inflation is the process that flushes the debt out of the system.

Massive default will flush it out.  Deflation should also eviserate excess production capacity.  Once demand returns inflation will ensue due to the lack of slack in capacity (and possible rampant government printing by then).

[srb123]

As above AUD is really strong. (But I am biased being an Aussie.)

Most of our recent success is attibuted to the boom in China, we sell them heaps of stuff from the ground. (Coal, Iron Ore, LNP etc.) (Also the reason for the High Interest rates here.)

But we have very strong Trade, Military ties with the US too, not to mention Oprah likes us.

So, IMO, an investment is Australia is the ultimate Each-Way bet on China becoming even bigger, the USA getting out of its current mess, or both.

[ribuck]

Most of our recent success is attibuted to the boom in China

Not to mention that the previous government paid off the national debt before the US/Europe financial crisis.

[hugolp]

After all the bad debt is flushed out of the system though, watch out for inflation.

Explain, inflation is the process that flushes the debt out of the system.

Massive default will flush it out.  Deflation should also eviserate excess production capacity.  Once demand returns inflation will ensue due to the lack of slack in capacity (and possible rampant government printing by then).

There is no excess production capacity, just production of the wrong type for the present demand.

Slack capacity is an aggregate and thus is quite useless to understand what is going in the economy. Why does it matter if there is a lot of construction machinery stopped if there is not enough demand for houses anymore. Does stopped construction machinery means anything if there is a growing demand for computer chips? or if price of food is going up? All this construction machinery is slack or malinvestments?

[Bimmerhead]

In what sector do you foresee inadequate production capacity in the short term?  Surely there is no expectation of inflation in the computer chip sector?

As far as food goes, if prices are rising because of the use of corn for ethanol for example, that problem could disappear as rapidly as it did two years ago when everybody parks their SUVs again and oil drops back below $30/barrel.