let me guess:
Gold
Reason:
Its a universal mechanism of exchange that cannot be controlled directly by politicians and central bankers.
The real underlying 'price' of gold is controlled because of the fact that its increase in quantity is determined over the long term by its extraction rate, ie how much 'new gold' is found and dug from the ground (from memory this is only a few % a year). The underlying 'price' of a curency is essentially determined by its central bankers (who control the interest rate and the physical amount of the currency)
Therefore the underlying attractiveness of gold is one doesnt know how currencies will interrelate with each other (ie which currency will be 'more valuable than the other'), however the pricing of gold relative to 'purchasing' power should be maintained over the long term, given that purchasing power is expressed as a relationship between the currency and the good. However gold should have a relatively stable relationship over the long term between the currency and the good. ie for strong currencies the price of gold/currency will be weaker (however expressed in terms of the 'good', its more constant) and vice versa.
Therefore if one is buying gold in US$, if the australian dollar depreciates, then the purchasing power of the AU$ also depreciates, yet because one holds gold, their purchasing power is better maintained.
If the AU$ appreciates, then usually this is because commodity prices are higher (which includes gold), therefore the US$ price of gold should also be appreciating, thereby maintaining the purchasing power for Australian holders.
A holder of an income producing asset might not receive the same degree of purchasing power parity if the income received (especially after it is taxed as taxable income) is less than the loss in purchasing power. There is also the market pricing risk of the underlying asset (ie the pricing of the underlying asset in currency terms can move over time)
Secondly a purchaser of income producing assets might receive an even lower degree of purchasing power parity, whereby that asset is usually income lossing (ie negatively geared residential property) and one is hoping for a capital gain. This produces a potential double whammy in that the asset price declines both in fiat currency terms and in purchasing power terms.
Thats the theory anyway
.
And personally i think things are more multi dimensional than this. And i think one of the big risks is that this way of thinking works well in an inflationary environment, but is yet to be assessed in times of a deflationary environment (not a risk for australia, but definately a risk on a global basis)
Therefore for myself i am concentrating on income producing assets whereby that income generation is sufficiently high that i am compensated for potential loss in terms of fiat currency depreciation. Further more with the high AU$, i have a low risk (exchange pricing risk) of being able to diversify into international assets that like wise generate high income (that is either used for dividend payments or share buybacks at low PE's, overseas equities tend to have lower pay out ratio's than their australian counterparts).
Gold
Reason:
Its a universal mechanism of exchange that cannot be controlled directly by politicians and central bankers.
The real underlying 'price' of gold is controlled because of the fact that its increase in quantity is determined over the long term by its extraction rate, ie how much 'new gold' is found and dug from the ground (from memory this is only a few % a year). The underlying 'price' of a curency is essentially determined by its central bankers (who control the interest rate and the physical amount of the currency)
Therefore the underlying attractiveness of gold is one doesnt know how currencies will interrelate with each other (ie which currency will be 'more valuable than the other'), however the pricing of gold relative to 'purchasing' power should be maintained over the long term, given that purchasing power is expressed as a relationship between the currency and the good. However gold should have a relatively stable relationship over the long term between the currency and the good. ie for strong currencies the price of gold/currency will be weaker (however expressed in terms of the 'good', its more constant) and vice versa.
Therefore if one is buying gold in US$, if the australian dollar depreciates, then the purchasing power of the AU$ also depreciates, yet because one holds gold, their purchasing power is better maintained.
If the AU$ appreciates, then usually this is because commodity prices are higher (which includes gold), therefore the US$ price of gold should also be appreciating, thereby maintaining the purchasing power for Australian holders.
A holder of an income producing asset might not receive the same degree of purchasing power parity if the income received (especially after it is taxed as taxable income) is less than the loss in purchasing power. There is also the market pricing risk of the underlying asset (ie the pricing of the underlying asset in currency terms can move over time)
Secondly a purchaser of income producing assets might receive an even lower degree of purchasing power parity, whereby that asset is usually income lossing (ie negatively geared residential property) and one is hoping for a capital gain. This produces a potential double whammy in that the asset price declines both in fiat currency terms and in purchasing power terms.
Thats the theory anyway
.And personally i think things are more multi dimensional than this. And i think one of the big risks is that this way of thinking works well in an inflationary environment, but is yet to be assessed in times of a deflationary environment (not a risk for australia, but definately a risk on a global basis)
Therefore for myself i am concentrating on income producing assets whereby that income generation is sufficiently high that i am compensated for potential loss in terms of fiat currency depreciation. Further more with the high AU$, i have a low risk (exchange pricing risk) of being able to diversify into international assets that like wise generate high income (that is either used for dividend payments or share buybacks at low PE's, overseas equities tend to have lower pay out ratio's than their australian counterparts).
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