The Consequences on
our standard of living:
The new World Currency is SDR – Special Drawing Rights:
The answer to our economic predicament is what John Maynard Keynes already proposed in the 1930s: an international valuable reserve asset, rules for pricing national currencies against it, and penalties for countries that run a persistent deficit. After the financial crisis of 2008, there was a flood of proposals along these lines from the UN, from the economist Joseph Stiglitz, and even from the governor of the People’s Bank of China. None of these proposals have led us anywhere.
The plan is to turn the IMF – owned by the RKM, into a kind of super central bank, with lots of “international reserve assets” – SDRs (Special Drawing Rights) – that it can hand out to any country that may need them. Don’t ask too many questions. Put into simple words: The new world’s money system would be based on paper money again and managed by global bureaucrats. You’ll probably immediately grasp the fact that this is a hopeless proposal; a super bank run by super economists, it won’t take long before it blows up the world’s entire financial system.
Any system based on paper, like the current one will blow up anyway. No paper-money system has ever survived a full credit cycle, because paper money – a form of primitive, credit-backed money – is without any discipline, unlimited. This fact – and not the lack of international monetary reform – is why there are so many bubbles now.
Debt can’t grow forever:
When interest rates fall – often pushed by central banks to artificially low levels and held there for an extremely long period of time – credit expands and the burden of debt grows. That has been happening for the last three decades. And now, the entire economy depends on something that can’t possibly continue. Debt can’t grow forever.
As long as rates stay low, the system is maintained and supported, but as the quantity of debt increases, the quality of it decreases. Debtors’ balance sheets become weaker and weaker. Eventually, the credit markets change direction. Interest rates start going up. Then the weight of all that debt comes crashing down like an avalanche. And when it gets started, there is no stopping it. All you can do is make sure you’re not in the way!
If all Central Banks start to taper their bond buying, they risk resurrecting the calamity they’re trying to suppress – a deflationary depression. So, the Central Bankers have got to keep going. The markets and the economy depend on it. In the not too distant future Gold will glitter again!
“Earnings grow due to only two reasons—revenue growth and/or margin expansion. Unfortunately, the outlook on both fronts is bleak. Margins are already at cyclical peak levels – the best that can be expected on that front is for margins to remain stable. That leaves revenue gains as the only driving force for earnings growth. But you can’t have significant revenue gains in the current environment of constrained economic growth. Revenue growth is a direct component of nominal GDP growth, and nominal GDP growth has been lukewarm at best.”
The number one threat right now is the rise of interest rates, as Case-Shiller home prices, notes on his broker blog.
“And by interest rates, isn’t meant the absolute level, but the velocity of the increase, taking place at a speed the markets are currently unprepared for and businesses may not have planned for. The effect of higher rates on the housing market is already being felt in the New Home Sales numbers. Resulting in a 20% drop-off in new home sales, and this does not bode well for existing home sales in the coming months.”
Debt is needed to produce GDP:
The world’s so-called richest nations need $7 of debt to produce 50 cents of GDP. The world is bankrupt, and all of the financial statistics that are being published are just a mirage of a castle built on a foundation of worthless paper money. The world can of course never pay back the debt with real money, and the world can’t even pay the interest with real money.
Every 1% increase in the interest rate means additional costs for the G-7 of a staggering $1.4 trillion. That is absolutely massive. $1.4 trillion is only slightly less than the entire GDP of Canada. If interest rates increase by 10%, then we are looking at an increase in interest expenses for the G-7 nations equalling the entire GDP of the United States.
Anyone with a sane mind will realize that this whole situation is untenable, and sadly, this will end very, very badly for the world. We don’t just have an economic bankruptcy unfolding, but we also have a moral and ethical bankruptcy-taking place on top of the continuous threat of war, made even worse by the the fact that most governments are taking away all freedoms and personal initiatives, rendering the people of the world dependent on state hand-outs.
Doomed monetary system:
So our monetary system is doomed. It’s a 100% failure guarantee. No fiat currency has ever survived in the history of our planet, now all of the world’s currencies being fiat. Consequently, the upcoming shift will be the most dramatic in world monetary history. It’s going to be the world’s greatest wealth transfer in history. Therefore, it’s also the greatest opportunity in history. How high will gold go? Maloney says;
“The more you study it, predictions of $2,000 or $5,000 gold become absurd. It’s absurdly low.”
The Derivatives blow-up is a disaster waiting to happen, people’s purchasing power will disappear overnight, bringing down the monetary system. Be prepared, because the world is entering into an extraordinary phase, never before encountered in recorded history, which will eventually turn into hyperinflation. Nationalisation – not confiscation- of privately owned gold is not that likely, as the majority of US dollars are held outside the USA. When foreigners get scared and dump the US dollar that will make the disaster in the US even worse. Gold jewellery and silver are less likely to become targets of nationalisation. If this nevertheless were to take place: sell your gold and immediately buy from the proceeds of your gold other hard assets, protecting your profit. Lots of violence and social unrest can be expected. Take precautionary action to ensure your family has an emergency food stock, for at least a 3-month period.
People with personal ownership of gold and silver and a 3-month emergency food stock in storage have the best chance to survive. The authorities are scared to death of what may unfold. When society enters this stage of the crisis; riots will break out all over the place, as many cities will only have food for not more than a few days. According to an agreement signed in Washington DC last July; between FEMA and the Russian Emergency Situations Ministry;
“Russian troops can now be deployed to provide security (in the USA)” Based on the philosophy, US troops won’t shoot on Americans, but Russians will.
Potential for rare gains:
Gold is at a 5000-year low, due to manipulation, but they cannot continue with that forever. That’s why gold and silver have the greatest potential for very rare gains in history, while it is at present a huge buying opportunity, at least for the time being.
Middleclass citizens wanting to evade these threats must protect themselves by preparing for their survival now. A new monetary system will be put into place.
Real estate, bonds and stocks are grossly overvalued. The only commodities undervalued are precious metals. There will come a day when the gold price is double the Dow being the greatest bubble in history: Gold really hit an all-time low in the year 2000. It was a 5,000-year low. This is surely one of the biggest misrepresentations in history, as far as value goes.
A new monetary system should be in place by or before the end of the decade.
When everything starts to fail, the banksters will be looking around for answers, clamping onto anything that may have worked in the past. It’s going to be a global financial seizure the likes of which has never been seen before. This shift will be the most dramatic in world monetary history. It’s going to be the world’s greatest wealth transfer in history. Therefore, it’s the greatest opportunity in history.
The structure of the gold market is changing. Gold is moving from so-called “weak hands”—those who saw gold as a “trade” and/or were seeking quick profits—to “strong hands,” people that see the big picture and are buying for the long term.
Gold is moving from the West to the East. You’ve heard this before, as the graph below irrefutably outlines this fact—and the trend shows no signs of letting up.
The East will therefore have an increasingly greater impact on price. As Asian countries take over more and more of the market, their influence on the price will only grow.
“The gold bull market is not over, regardless of what GS (Goldman Sachs) says. When I read their comments on the precious metals market, I sometimes wonder if they really understand it. But then again, do any of their analysts even own any gold?” wrote Mrs Chang of Casey Research.
China and India accounted for almost 60% of the global gold jewellery sector last quarter, and roughly half of total bar and coin demand. Furthermore, both countries saw almost 50% more consumer demand in the first half of the year compared to the same period in 2012.
The economies of the EU are fundamentally broken. They require restructuring, ‘like turning around’ a failed company. Don’t believe this will happen and so there won’t be a recovery in the EU.
Unfortunately, the good reports from Germany don’t change the big picture either. The never-ending crisis keeps returning. Fear has found its way back into the markets, even more so since the polarised elections in Italy and France. Both ran on anti-euro platforms, against ‘Brussels bureaucrats’ and ‘dictates from Berlin.’
Italy’s Grillo and France’s Marine Le Pen have even suggested they should ditch the euro currency. The EU is not only broke, but broken too, while a EU recovery in the near future doesn’t seem feasible. All this is contributing to the greater truth; the markets are beginning to turn dysfunctional.
The money system – the scales upon which the world’s market functions – is purposely being destroyed. The monetary signals that guide the markets, which are supposed to represent the supply and demand decisions of billions of people, have become twisted.
Central banks are inflating the world’s money supply at an unprecedented pace. Never before since the world’s monetary system became unchained from both gold and real interest rates, has so much money been printed. The central bankers are responding to their political masters’ demands for easier money and cheaper credit.
QE never makes it into the real economy:
The implemented QE’s; represent money created on a computer screen that never makes it into the real, producing economy. It goes directly into bank reserve accounts, and it stays there. Except for the small amount of “vault cash” available for withdrawal from commercial banks, bank reserves do not leave the doors of central banks.
These are policies that encourage spending over savings, reward the profligate over the prudent, and support the failing at the expense of the successful.
Edward Gibbon (1737-1794), the British historian who chronicled the rise and fall of the first great Western civilization Greece, wrote:
“In the end, more than freedom, they wanted security. They wanted a comfortable life and they lost it all – security, comfort, and freedom. When the Athenians finally wanted not to give to society but for society to give to them, when the freedom they wished for most was freedom from responsibility, then Athens ceased to be free and was never free again.”
Today these words apply to almost all of the free people living in the West. The drive for freedom and a better life through hard work, saving, and independence has been replaced by a gutless quest for the illusion of security. Rather than striving to leave our children in possession of a better world – with more financial security – political leaders bicker about how to change the rules so that still more debt can be stacked upon their grandchildren.
The Consequences on our standard of living:
This sea change in the debt-dependent culture of the West will have an appalling effect on our standard of living. The first changes are already being felt – real wages haven’t risen since the gold standard was abandoned in 1971. And – bigger declines are coming.
The world’s economy is now entering a so-called blind alley. By wilfully abdicating the responsibilities of the markets – by monetising our debts, by deliberately inflating our currencies, by bailing out failed companies, and by promising to deliver more benefits than can be afforded.
The major economies of the West have chosen the path of collectivism. There is no escape from this path, which will soon lead to massive dislocations, huge price increases, and poverty on a scale unseen in our lifetimes.
The Spanish Empire destroyed itself by “finding” money, rather than by building industries. Obama and Bernanke have acted similarly by cancelling their external debt. They just do it in a smarter, covert way, calling it “quantitative easing.”
“Bernanke played down concerns about quantitative easing limits in a dovish testimony to Congress that suggests the US Federal Reserve will continue to purchase assets.”
The Fed chairman systematically went through the costs and risks of its third round of quantitative easing, known as QE3, and argued that they were either offset by the expected benefits or else the central bank had them under control.
“Anyone with basic math skills should be able to understand that we will never repay our $15 trillion-plus debts, if accounted honestly – an amount equal to a staggering $150,000 per taxpayer. And that’s only if you treat taxpayers equally, which, unfortunately, is not the case. As things stand today, about 10% of the population has to repay about 90% of these obligations. And that will never, ever happen. What will happen will be a truly epic financial disaster.”
Here’s the worst part – these financial problems have been growing since 2008. Far too much debt has been accumulated this way, without enough savings. And what has changed? Nothing. The governments’ debts continue to grow and grow.
And how is the situation in the private sector?
How the rich get richer:
Let’s take a look at General Electric’s corporate over-indebtedness. GE almost went bankrupt in 2008 because it was totally dependent on the short-term financing available in the money markets. When that funding dried up, GE couldn’t borrow a penny from anyone in the world on any terms it could afford. Why not? It owed creditors almost $700 billion, which made it the world’s fourth-largest debtor, bigger than most of the sovereign borrowers on Earth.
“It is insane to believe that a private company will ever be able to repay debts of this magnitude, especially once you understand that GE only earns 1.6% on its assets. That’s why the U.S. government had to bail them out and guaranteed all of its debts through last year. And that’s why GE eventually will go bankrupt, too. But, don’t think the last few years were favourable to start paying down some of this debt? The Fed essentially makes it impossible to lose money. Yes, they’re only making 1.6% on their assets – but the Fed is allowing them to finance those assets essentially for free. And that’s exactly why their cash flow is up about $10 billion annually since 2009”.
But what did GE do with this extra money?
It paid out $20 billion in cash dividends and bought back $12 billion in stock. As a result, it now has less equity on its balance sheet ($116 billion) than it had at the end of 2009 ($117 billion).
“This is not made up. Rather than to deleverage, GE has actually become more leveraged over the last three years, much like the rest of America.
An economy is simply too complex for people to understand and control wisely. On June 7 2012, Fed chief Ben Bernanke (accidentally?) admitted this complexity. In regard to higher capital requirements for banks, and a blizzard of 300 new financial regulations, he was asked;
“Has anyone bothered to study the cumulative effect of all these things?” Bernanke’s answer was no, “It’s just too complicated.” This was an amazing admission that the government’s management of the economy is just a collection of shots in the dark.
After this nightmare is over, we can make a new start toward an age of peace, liberty, and abundance, but the transition – as the existing political structures come down and a century of malinvestments is washed away – will be nasty.
“I think the whole world economy in general has entered what Austrian philosopher and economist Ludwig von Mises called “planned chaos.”
“The Fed knows that the U.S. economy is not recovering,” Peter Schiff noted. “It simply is being kept from collapse by artificially low interest rates and quantitative easing. As that support goes, the economy will implode.” We haven’t really created any more productivity in our economy. We haven’t really gained an important, material competitive advantage all of a sudden. And we haven’t done anything to solve the fiscal crisis. In fact, it’s only been made worse.
Nothing has been done to solve the political problems that lead to overspending. At the core, these issues are driving gold. In the process, they’re going to re-inflate the entire economy. In the near term, it’s going to feel great. It’s going to feel like we’ve solved all our problems and everything’s fine. But the end game is a huge inflation.
It’s too risky not to own gold today, regardless of the price. Keep in mind: Global central banks are dedicated to destroying their currencies. And gold will eventually prove to be the victor as paper currencies become worth less and less.
New World Currency Coming (SDR)
Death of the Dollar, SDR Composition, AIIB 57 Founding Nations and the New Currency? Dollar to Fall in Value.