Who is the person most responsible for the crisis we are in today? “If you are thinking it’s me… YOU ARE RIGHT! And what do you think will be the final outcome of the monetary crisis? I’ll tell you what the outcome is… the total destruction of all debt based monetary assets. Everyone will lose everything held by a 3rd party in a blink of an eye and we will return to our Constitutional Gold Standard.” Said Alan Greenspan in a recent interview, during a conference for a selected group of investors in Chicago 2 month ago.
The US wants nothing more than to destroy the global fiat monetary system because there is no other way to get out from under their massive debt burden. So what Alan Greenspan said makes sense.
“The Federal Reserve, the central bank of the US, is nearing the end of its ability to manipulate the US economy without producing consequences worse than those it set out to avoid in 2008. The Fed has no good exits from seven years of market manipulation. If it continues its current policy of reducing purchases of assets, the so-called ‘tapering,’ it risks throwing the U.S. into a recession. If it reverses course and pauses the taper and later increases asset purchases, it risks destroying confidence in the dollar among foreign creditors of the U.S. Both outcomes are potentially disastrous, but there are no good outcomes on the horizon. This is the result of manipulating markets to the point where they no longer function as markets providing useful price signals and guiding the efficient allocation of capital. Today markets are a mirage, created by the Federal Reserve, which is caught in a prison of its own device.” Opines Jim Rickard.
As gold and silver continuously are manipulated downwards – Eric Sprott warned that the Bank of England gold vaults are empty and there will be a price to pay for what Western central planners have done. He warned about the banking system too. – Sprott: “We have the Chinese coming in and buying an extra 1,500 tons (of gold). We will have a GLD metric that could be as much as 1,000 tons just this year, year over year. The Indians haven’t changed the laws yet but I think that will be forthcoming, and they can get back into normal buying mode…”
France is openly pulling away from the US Dollar. With domestic considerations are getting agitated. French foreign minister Michel Sapin put it bluntly at a recent economic conference: “We [Europeans] are selling to ourselves in dollars, for instance when we sell planes. Is that necessary? I don’t think so. I think a rebalancing is possible and necessary, not just regarding the euro but also for the big currencies of the emerging countries, which account for more and more of global trade.”
The $8.97 billion fine BNP agreed to pay was a record amount. But what’s more is that the bank was barred from conducting U.S. dollar transactions for an entire year. That is even more than the fine, and now annoys all other foreign banks. More than half of cross-border loans and deposits are transacted in dollars, and the US dollar is involved in 87% of all trades. Freezing a business or country – Iran or Russia, for example – out of dollar trade has a devastating effect.
The reason is; as the U.S. may be more restrained to use force in international policy, it’s becoming more careless about using sanctions and false flag fates. This is beginning to scare US allies, and infuriate foreign banks. According to the 2012 complaint that accused London’s Standard Chartered Bank of violating Iran sanctions, one of the bank’s executives complained to U.S. officials: “You Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians?” Well, as long as U.S. dollars are used in global trade and investment, any large transaction on the planet will likely involve a U.S. bank at some point or another. And that probably gives the US the authority to levy huge fines and penalties on banks like BNP Paribas.
But wait; what happens if countries and banks stop using the dollar? Then: “The U.S. dollar hegemony and role as a reserve currency is soon going to come to an end. This will lead to a precipitous fall of the dollar. The further consequences will be severe U.S. exchange controls. It will be virtually impossible for private individuals to transfer any funds out of the United States… The problem is that credit and printed money no longer have any effect. Thus when the 2008 problems re-emerge with a vengeance, there are absolutely no effective measures that governments can take. So if governments can’t do anything, what can investors and savers do? Well, I and many of the lone voices have for a long time advised people to get out of the banks and also get out of the weak currencies like the dollar, the euro, the yen, and most others.“ Concludes Egon von Greyerz.
China, Russia and other emerging economies are also ditching the dollar. Another important step away from the US dollar was recently discussed at the BRICS summit in Brazil. The five member nations have formed their alternative to the US Dollar, and the World Bank. With $50 – soon to be increased to $100 – billion, the BRICS Development Bank will invest not only in Brazil, Russia, India, China and South Africa, but also throughout the developing world.
“The model is the Brazilian BNDES, which supports Brazilian companies investing across Latin America,” explains Pepe Escobar at the Asia Times. “In a few years, it will reach a financing capacity of up to $350 billion. With extra funding especially from Beijing and Moscow, the new institution could leave the World Bank in the dust. – Compare access to real capital savings to U.S. government’s printed green paper with no collateral.”
This makes it clear; the BRICS are eliminating the dollar as the world reserve currency, which will make the US Dollar worthless. “Why use a currency that has nothing to back it up? History has shown that when a government starts to devalue its currency, it is on the way out. These fools in Washington are cutting every Americans’ throat. Look what happened to Germany in the early 1930s. Don’t think it can’t happen in the USA, because it can. In today’s situation, it could happen a soon people become aware and desperate.”
Over the preceding thousands of years, humans had learned three important lessons:
- That they could not rely on authorities to manage a paper currency; it had to be backed by gold;
- That governments must not run large and repeated deficits; and
- That markets must be allowed to freely discover (interest) prices rather than have them imposed by authorities.
After so many episodes – over such a long time – causing so much misery – only a mental defective would now ignore these lessons. But that’s exactly what authorities have been doing all the time. The trouble comes when it is needed. Markets never go in one direction only forever. Sooner or later, they need a reason to turn around. The longer the trouble is held off, the more trouble there is waiting to express itself.
Debt is meanwhile at all time highs. And the cost of capital, expressed as interest rates – is at an all-time low. Something is clearly wrong. Debt is always and everywhere a worry and a threat. It must be repaid. The more of it is outstanding, the more cause for worry. If the debtor isn’t able to pay, and consequently doesn’t pay, how about his creditors are they still solvent? What if the currency goes down? Or deflation appears? Debt raises questions, which makes the financial system horrendously unstable.
When the quantity of debt increases, usually the quality goes down. It doesn’t make sense to increase the amount of debt, as the price – interest – of it doesn’t increase too. It is contrary to the most basic law of supply and demand. But soon the price of debt is going up, even as the supply of debt worldwide reaches historical levels.
In a world with total debt between 710 – 1.500 trillion, including unfunded liabilities and derivatives – is totally unprecedented – this global debt to GDP is in the range of 21 – 1, and can never be repaid out of proper revenue growth. The problem – on purpose – is originated in 1913 when the Fed was created, and again on purpose exaggerated in 1971 when gold no longer backed any currency. Soon as credit and printed money no longer have any effect, a lot more people will realize that wealth preservation and insurance in the form of physical gold and silver is highly essential. The moment the 2008 problems re-appear with a vengeance, there are absolutely no effective measures that governments can take.
That is pushing gold to $5,000, $10,000, $20.000, and eventually much very much higher, at that moment the whole world wants to own gold. As always, it’s important not to wait for the herd, but to take action now. Get out of the banks and out of the weak currencies as the dollar, the euro, the yen, and most others. Physical gold and silver should be held outside of the banking system. That will be the best form of wealth preservationand insurance for you.
A helpful way to think about asset and savings allocation is to imagine the world without the current system of fiat money and ponder what people really value and use in their daily life. Common sense tells; water, food, energy, safety, and shelter would be the most desired. Make sure you have access to these necessities. Bear in mind; gold and silver will play major roles in whatever monetary system emerges from the ashes of the current one.