New Investor Survey Provides Additional Evidence of Regime Uncertainty
By Robert Higgs • Tuesday October 12, 2010 8:26 AM PDT • 6 Comments
Writing for CNBC’s “Behind the Money,” John Melloy describes the findings of a recent survey of investors:
Institutional investors fear a government policy mistake far more than inflation, terrorism, a housing double dip, a weak dollar, poor earnings or any other potential risk to the economy, according to a survey of 100 mutual fund, hedge fund and pension fund managers by Citigroup Global Markets.
“Government Policy Missteps” garnered more than a third of the participants’ votes as their biggest fears in the quarterly survey, ahead of the more than 15 percent who cited “Protectionism,” which is also strongly-tied to the actions of the Administration and Congress.
Last week, I had occasion to speak to several wealthy investors, each of whom attested to the apprehensions associated with regime uncertainty. Most of them seem convinced that the Fed is in the process of destroying the dollar, but none of them has a firm expectation about what will replace it as an international reserve currency. Many see no good prospects for domestic investment at present, except in certain commodities. Needless to say, perhaps, such an outlook by investors does not portend a robust recovery from the current recession, if indeed it is compatible with any recovery at all.
We live, as the saying goes, in interesting times—indeed, much too interesting.
Tags: Business, Economics, Federal Reserve, Politics, Property Rights, The State 
Dr. Higgs,
I’m curious if you’ve ever written about how we would transition from the failed fiat paper money to a commodity-backed system. Is it as simple as getting the state out of the picture and allowing such a system to form organically?
Assuming precious metals like gold and silver were part of such a system, how would they be valued? Since the vast majority of people have no holdings whatsoever, what would be the process of distributing whatever amount the government currently possesses so that a genuine economy with real money could once again be used?
Steve Hogan | Oct 12, 2010 | Reply
Steve,
I have not written anything about making the transition from fiat money to commodity-backed money, but evidently others have considered this subject. Perhaps some Beacon reader can make a recommendation from this literature?
Robert Higgs | Oct 13, 2010 | Reply
Fiat currency has its uses. Consider China (PRC). The PRC holds a large reserve of USD, enough to threaten the USA, were China to dump her reserves quickly. Also, the USD allowed PRC to create a trade surplus. Also, China can now acquire very large deposits of resources in Africa and Australia, and pay for these in USD. PRC gets a hard resource (increasing in value) by giving up a paper resource (decreasing in value). Were it not for the USD, likely the PRC would be forced to give a real resource for a real resource, and so have no net gain.
alzurzin | Oct 21, 2010 | Reply