The worst fears about the global monetary system are coming true. The wheels are starting to fall off. A crash could be just around the corner. The currency market is the world’s largest, most important market. It’s where governments, corporations, and investors execute trillions of transactions every day. It’s where a Japanese carmaker goes to exchange money earned in US dollars to pay expenses in Japanese yen. It’s where a Spanish-based hotel chain must exchange dollars earned in Spain into euros that can sit in its local bank account. It’s where nations buy and sell currencies by the billions in the normal course of doing business. The currency market is far larger than the stock exchange market. After all, it’s the money change market that shows alarm first hand. When there are real problems in the economy, those are seen clearly in the currency market.
Many of the world’s major currencies are plummeting in value. They plummet in response to insane government policies that constitute the largest monetary experiment in human history. These policies constitute “currency wars.” Says Jim Rickards who wrote a book about. This is where the politicians of major economies actively devalue their currencies in order to make their exports cheaper to the rest of the world – and make it so they can pay off debts with devalued currencies. Recklessly expanding a country’s monetary base is disastrous for its currency. It’s truly a “race to zero.”
The result of this experiment will be financial disaster. People must take steps to protect themselves. A nation’s currency is like a fluctuating “stock price” of that nation. Generally speaking, if a country manages its finances well and engages in productive behaviour, its currency appreciates over the long term. If a country racks up huge debts, and runs its finances like a drug addict, its currency depreciates over the longer term.
Six major central banks — Switzerland’s, EU’s, England’s, Canada’s, Denmark’s and Singapore’s — have worked to weaken their currency in the last couple of weeks. Actually, little is known about the fact there are eight more! The currency wars are moving so fast you can hardly keep track of which country’s beggaring which neighbor. It turns out that are India, Turkey, Egypt, Romania, Peru, Albania, Uzbekistan and Pakistan whom joined the free fall too.
And here is a sneak peek into the future about what is in the making for all of us; Zimbabwe and Venezuela are two of the worst managed economies of the last decade. The leaders of these nations treated the national coffers as a personal piggy bank. While they got rich, their constituents toiled in poverty and suffered hyperinflation.
Zimbabwe’s currency has lost nearly 75% of its value since 2009 after its currency was reissued. Venezuela’s currency has lost 70% of its value over the past 10 years.
And how about the euro, the currency of the world’s largest economic bloc, the European Union? The EU economy is struggling. The high-tax welfare states of France, Spain, Portugal, Italy, and Greece are drowning in debt. Their economies are slowing and deflation is taking hold. Unemployment is soaring. And like Japan, this dire outcome follows massive easing from the European Central Bank. These economies simply can’t compete with Asia and North America. Unsurprisingly, the central bankers are responding with more stimulus and currency devaluation.
Last month, ECB President Mario Draghi announced he would flood the European currency union with more than $1 trillion in newly created money. It’s a desperate attempt from a desperate group of politicians. Instead of asking citizens to make needed changes in government policy – The ECB announced its highly anticipated bond-buying program, or quantitative easing (QE). Each month until at least September 2016, the ECB will purchase 60 billion euros’ worth of bonds issued by euro-area central governments and agencies.
The ECB also confirmed that its purchases would include negative-yielding bonds. The German yield curve is negative already during four years, and France’s is negative during three years. Now 16% of government bonds issued worldwide offer negative interest rates. German government bonds offer negative yields on maturities up to six years, according to Tradeweb, along with those in Denmark. For five years, the Netherlands, Austria, Sweden, and Finland are in the club. For four years, add France and Belgium. In Switzerland, bonds out to a whopping 13 years in length have negative yields. That’s really a sign on the wall of the rotten state of the monetary system. Low and negative sovereign yields are bullish for gold.
Denmark’s central bank – cuts interest rates for the fourth time in three weeks. The deposit rate has fallen from -0.50% to -0.75%. It now costs you three-quarters of a percent to deposit money in Denmark.
They peg the currency – the krone – to the euro. After the Swiss National Bank abandoned the peg on the Franc-Euro rate last month. Denmark Krone is the last remaining European currency pegged to the euro.
Denmark is cutting rates to discourage people from buying the krone and putting pressure on the peg. The market believes the krone peg will break, just as the franc did. Denmark’s efforts are futile. Eventually, Mr. Market always wins.
People often dismiss gold as an asset because it pays no yield. It simply sits in your safe. Now, gold can sit in your safe and not deplete your wealth – better as holding certain sovereigns bonds would.
Denmark even started issuing negative rated mortgages with – 0,3% interest rate. This is not a bargain when realized that the numbers put on a computer give the bank the right of confiscating a large percentage of the mortgage holders’ hard earned income by putting people into debt slavery.
The latest ECB action sent the euro to an 11-year low against the dollar. It has plummeted 19% since last April. – A 19% decline is an astonishing move for a major currency. This isn’t a high-flying tech stock. It’s not a speculative gold stock. This is the value of your bank account. This is the value of debts. This is the currency of the world’s largest economic bloc. And it’s falling apart.
Two of the biggest banks on the planet have been battling this fight for several months now. The Bank of Japan and the European Central Bank, they don’t even try to hide it — they want to cheapen the yen and the euro to boost exports and boost inflation, consequences and a history of cooperation with the U.S. Federal Reserve be darned!
The Real Problem:
But here’s the real problem. When every nation is trying to weaken her currency against everyone else, how can anyone win? Currencies trade on opposite sides of an alternate against other currencies, including the U.S. dollar. Both sides can’t go down or up at the same time! So ultimately, this is a battle many central banks can’t win. Some of them have to lose. The question is, who?
The yen lost 33% of its value since late 2012, hitting a seven-year low against the dollar. This again is a huge move for a major currency.
In an effort to stimulate Japan’s economy, Prime Minister Shinzo Abe printed since 2012 about 60 to 70 trillion yen a year – about $600 billion for his massive quantitative easing (QE). Following the recent recession announcement, Abe said he would up the QE to 80 trillion yen ($676 billion). Bank of Japan Governor Haruhiko Kuroda said the increased QE “shows our unwavering determination to end deflation.” In other words, Japan will print and print and print itself into oblivion.
The Canadian and Australian dollar plunged 17% from its 52-week high on July 1. And investors believe the Reserve Bank of Canada and Australia will cut rates to a record low from today’s 2.5%.
Last week Singapore and New Zealand joint the global currency battle. So far nine countries eased policy in January alone, from India to Denmark to Canada, to weaken their currencies and gain an economic edge.
The Russian ruble has fallen more than 50% over the last year against the U.S. dollar. That’s the biggest and sharpest decline in Russia’s currency since its treasury defaulted on its sovereign debt back in 1998. This move leaves millions of people in Russia with a far lower standard of living. Their bank accounts are now worth half as much – in terms of purchasing power; factually these people are trying to survive on wages that have been effectively cut in half!
And last but not least another central bank is easing. – China gets in on the battlefield too: “China’s central bank, the People’s Bank of China (PBOC), cut its reserve requirement ratio – deposits that banks must hold in reserves with the central bank – by 50 basis points from 20% to 19.5%. This is the PBOC’s first cut of this kind since May 2012. The central bank did cut its benchmark-lending rate by 40 basis points from 6% to 5.6% in November 2014.
Goldman Sachs estimates the cut is equivalent to about a $100 billion liquidity injection. – It has become a panicked race to the bottom in the weakening of currencies.
And in one of the wildest currency moves in history; Switzerland had abandoned its peg of the Swiss Franc to the Euro, causing the Swiss franc to soar as much as 39% against the euro in one day following the Swiss National Bank’s removal of its peg. The result was mayhem with billions of dollars of trading losses by banks and investors around the world. Several foreign exchange brokers went bankrupt because their customers could not settle their losing trades. The Swiss operated in total secrecy. – Unlike the rest of the currencies, the Swiss franc is a longtime safe-haven asset – why it appreciated. Notice that the currency of a stodgy economically sound country likes Switzerland should never experience such volatility. Currency battles resemble real wars in the sense that they do not involve continuous fighting all the time. At certain times, there are intense battles, followed by lulls, and then continued with more intense battles.
Central banks the world over launched the most ambitious money printing and bond buying programs ever. That includes full-scale negative interest rates in the euro zone and a handful of non-euro-currency countries. – A new dimension in finance has arrived where bank deposit rates are negative, purchasing power is constantly destroyed, and risk can exist without return. Of course, buying negative-yielding bonds won’t do much to help the approximately 7.5 million Europeans between the ages of 15 and 24 who are neither employed, nor in education or training – Read more »
So, global currencies are collapsing as central banks continue to drown their economies in debt.
Commodities are plunging as global growth slows and the dollar strengthens. Meanwhile, volatility is returning to the market. This is causing severe tensions and stress in the financial markets. China has about US $ 3 trillion of investments dominated in US dollars, and each 10 percent of devaluation in the US dollar engineered by the Fed represents a $ 300 billion real wealth transfer from China to the U.S.A. The question will be how long China will tolerate this theft in accumulated wealth? If China were not able to defeat the US on the battleground, it successfully could attack through capital markets.
As necessary precaution the German gold activist Boehringer started the “Repatriate Our Gold” campaign in February 2012, he correctly is worried that the global economy is built on a fiction of currencies that aren’t backed by precious metals. Which is why he set out to make sure the gold that Germany and other nations say they have actually exists.
There are plenty of “black swans” lurking around: – Venezuela could default as oil prices plunge and inflation takes hold. Greece could leave the euro. The situation in Russia could further deteriorate. Or for example, major defaults in the energy sector, or highly leveraged hedge funds blow up – like Long Term Capital Management, run by some of the smartest men in the world that collapsed during the last Russian crisis in 1998. The business had so much exposure to derivatives that it was considered a systemic risk. Eventually 14 of the world’s largest banks arranged a $3.6 billion bailout.
Today the gross size of all bank derivatives exceeds 650 trillion – the real weapon of mass destruction – more than nine times global GDP. This causes a much larger systematic risk for catastrophe in a complex system that easily doubles or triples in scale, by factors resp. 10 to 100 times, as no bail out will be large enough to avoiding default. The solution to this systematic risk overhang would be simple and straightforward by breaking up large banks and banning most derivatives. Large banks are not necessary to global finance. The benefit would not be that bank failure is eliminated, and would be no longer a threat. The cost of failure would be containable and would not threaten the system. Derivatives serve practically no purpose except to enrich bankers through opaque pricing and deceive investors through off-the-balance-sheet accounting. – However the chance of such a solution is practically zero.
Clearly something is wrong in the currency markets today, so invest in gold right now. In short, governments can print more money, but they can’t print more gold. And with interest rates across the world at record lows and some even negative, gold is even more attractive.
Many may think gold and the U.S. dollar are moving up in lockstep. – They believe gold is the “anti-dollar,” which it is. But that’s not the case today. Gold is performing well for two main reasons…
First, gold is a currency, during times of currency battles; gold is the safest currency because it has no counterparty risk. And again, they can’t print more of it. People are starting to realize this, and they’re diversifying into the precious metal.
Second, gold benefits from the “fear trade.” When people get scared of what’s happening in the markets, they want the security of owning gold.
The value of the US dollar is manipulated by foreign central banks in cooperation with the Fed. The Japanese and European central banks print yen and euros to protect the dollar’s exchange value. If all major currencies simultaneous are being printed, the dollar cannot decline. The Dollar is backed by: “Used Car Loans, Bad Home Loans, Distressed Assets and Derivatives,” says US Senator Rand Paul.
Exploit your opportunity: Regardless of when the market correction comes, people have now an incredible opportunity to buy gold today. Gold is trading for less than $1,300 an ounce, down from its 2011 high of $1,900. It could easily hit $2,000 an ounce this year. Experts on this topic, believe gold will hit $7,000 an ounce, when the chance for collapses become more apparent, as result of the actions taken by central bankers. Undoubtedly many more shocks to the system will be seen in the coming years. For the expansion of the global money supply is continuing, which generally is bullish for precious metals. Even in the supposedly reliable Swiss franc, gold prices have increased by 134%.
What most people don’t understand is that the real value of gold hasn’t changed at all. Gold is an economic constant. For thousands of years, an ounce of gold has purchased the equivalent of a fine men’s suit. It still does. The lesson of history is that citizens should own some gold, store it safely, and don’t believe central bank and government lies. In fact, more investors will flee to the safety of gold in the coming months as trust in central bankers wanes.
The decline in global paper currencies is so big… so severe… and so broad… it has overwhelmed the traditional tendency for gold to decline when the dollar rallies.
People are fleeing paper currencies and buying gold. They see the metal as a safe haven. It is the only currency that is not someone else’s liability. It is a store of purchasing power that can’t be printed away at will. This has allowed gold to hold steady in the face of the dollar rally. It is holding steady when it isn’t “supposed to.” And when an asset refuses to fall when it’s supposed to, it’s a very bullish sign.
Gold’s real value doesn’t change because all of the gold that has ever been mined is still in existence. Additional mining barely increases to the total supply of gold. That’s what makes gold such a unique form of money: Its value never changes.
Currency manipulations may act as economic ‘shock absorber’ rather than providing outright any stimulus, what’s changing is the value of these paper currencies. They’re being massively debased. And the stunning downward falls of the currencies as mentioned above are loud warning shots. The US dollar will soon follow. For paper money, the race to zero has begun. Sooner or later, this entire system will collapse. It’s not known when. – No one does. – Possibly the Crime Cabal only. – Paper-money schemes have a perfect historical record: None has ever lasted. Eventually, the economic dislocations caused by volatile currency values become so bad that the entire system collapses.
The fascinating thing is that while people know this happens in other countries all the time, few realize that it will happen in the US and Switzerland too – it already is happening. When on the news is said that the dollar and Swiss Franc went “up,” they’re comparing it with other major currencies, while all together are going down simultaneously.
The decline of the US dollar as a reserve currency started in 2000 with the advent of the euro and accelerated in 2010 with the beginning of the latest currency war. That decline is now being amplified by China’s emergence as a major creditor and gold power. Not to mention the actions of a new anti-dollar alliance consisting of the BRICS, Iran and others. If history is a guide, inflation in U.S. dollar prices will come next. Those waiting for a sudden, spontaneous collapse of the dollar may be missing out on the dollar’s less dramatic, but equally important slow, steady decline. The dollar collapse has already begun. The time to acquire inflation insurance is now. So buy precious metals as much as you are able to do.
What nobody mentions is that the entire paper currency system is collapsing upon itself, losing value every day. Over the past decade, the world’s major currencies have lost their purchasing power – measured against gold – at an incredible pace of 12%-15% every year. As the race to the bottom heats up, these rates will continue to increase. For holders of paper money, a huge reckoning is coming. It will be like nothing they’ve ever experienced or even imagined.
EU-tensions about Grexit and Ukraine:
“I don’t see that it helps them to be in the euro, and I certainly don’t see that it helps the rest of the Eurozone, and I think it is just a matter of time before everyone recognizes that parting is the best strategy.” Concludes Former Federal Reserve Chairman Alan Greenspan.
It still is a chess match; two boards are in play at once… one in Greece and the other in Ukraine. They’re totally different, but Russia has the right setup in both games. President Vladimir Putin’s pieces are best positioned and three moves ahead of the other players.
Greece is a no-win situation for the EU and a no-lose situation for Russia. If Greece stays in the euro, it’s a welfare state, hobbling along with bills paid by the other members. If it leaves the EU, Russia promises to reopen trade, which would immediately give Greece a powerful financial ally.
The prime job of politicians is to stay in power. So French President Francois Hollande and Germany Chancellor Angela Merkel rushed to Moscow last weekend. They both came out with bold statements over the weekend favoring Putin’s desired outcome in Ukraine. He wants a broken state without EU membership, which he will be able to control. The wealthy – and historically Russian – eastern portion of Ukraine would be separated and called “Novorossiya.” It’s hard to say which situation is tenser. Greece’s fate will affect the entire EU. Originally in the last century, Germany tried to control Europe by force. Now, it’s using the EU. If it loses Greece, it will lose Spain, Italy, Portugal, and Ireland, too. Read more about in next week’s essay ‘EU break-Up’.
Please do realise that your hard earned money in your pocket is nothing else than a debt instrument from a third party. In a monetary system based on credit rather than bullion, deals are never completely done. Instead, everything depends on the good faith and good judgment of counter-parties – including everybody’s The No. ONE counter-party is your government. Its bills, notes and bonds are the foundation of the money system. But they are nothing more than promises – debt instruments issued by the biggest debtor.
A credit-based monetary system cannot last in the modern world. As the volume of credit rises, the creditworthiness of the issuers declines. The more they owe, the less able they are to pay. As time goes by, the web of credit spins out in all directions, entangling not just the present but the future too. It stretches out over the entire society… one person owes another… who owes a third… whose debt has been pledged to a fourth… who now depends on it to pay a fifth… and all calibrated in the IOUs of sketchy value from a sixth. Have you got that?
“Analysis 2015” by Gerald Celente
The economy is in a global depression followed by repression. Total CHAOS and WWIII is what the cabal want, however our future is in our own hands, if all concerned people WAKE UP NOW. – The outlook for Gold and Silver is bullish.