Today a man who is connected in China at the highest levels said gold is going to be the new global currency.
The Great Default
August 24 (King World News) – John Ing: Fifty years ago, under the crushing weight of debt to foreigners, President Nixon severed the dollar’s link with the gold standard, replacing the dollar’s backing not with gold but the “full faith” of the United States’ economy. What followed was an era of fiat money debt-fueled spending and the great inflation of the seventies and early eighties.
After years of massive deficits from LBJ’s Great Society and financing the Vietnam War, the United States did not have enough gold to back its debts. The Fed also tried to keep rates low until Paul Volcker forced rates to the roof to stop hyperinflation. Since 1971, the greenback’s purchasing power has lost 98 percent in real terms…
New interview from legend Doug Casey discussing gold, silver and
global chaos! To listen click here or on the image below.
Today America not only has record debts but the Fed keeps creating dollars as the tsunami of money cheapens the world’s leading currency. Money is free. America’s debt is larger than its economy and it is unlikely that debt will every be repaid, debasing the dollar. In less than 10 years, America’s debt has doubled to $29 trillion, another record. The dollar is structurally weak. The present system depends on the dollar, however without confidence in the dollar, the world has no valid reserve currency. America’s exorbitant privilege is not infinite as are the laws of economics.
Gold Is Going To Be The New Global Currency
The crux is that America is reliant on foreign capital to fund its deficits and profligate spending – that is America’s Achilles heel. The greenback is overvalued, deficits are unsustainable and inflation is their next problem. In Washington they do not seem to care. Both the economic vulnerability and geopolitical risk are more acute than it appears. If interest rates rise, paying down and servicing the debt will become unmanageable. Interest on their debt alone tops $500 billion and that is at new zero rates. America is operating a reckless financial system whose main characteristics are rising deficits and a rising stock market. A consequence of America’s profligacy, is that the dollar must depreciate further which will exacerbate rising inflation. And again, America remains divided against this threat. What damages trust in the US, damages trust in the whole world.
Investor confidence is fleeting. History shows that there is a cycle of debt, and borrowing trillions of dollars only makes it harder to be repaid. The overvaluation and bubble-like market conditions have masked many problems but the swamp is draining; exposing some very ugly frogs. Credit Suisse alone suffered a $5.5 billion loss from the collapse of Archegos Capital which cost the big banks a total of $10 billion in losses. Greensill in the UK filed for bankruptcy in March, sparking a corporate and political scandal, shortly after the Wirecard implosion in Germany.
Today, the crackdown from Beijing has hurt many of the big private equity players as Chinese tech stocks dropped the most since 2008. While global capital has so far digested these shocks, risk keeps piling up. Awash in a sea of debt, growing public and investor disenchantment over government mismanagement of the economy, pandemic and ESG has created inequalities and an unjust society. Without confidence, there will be pressure for familiar old remedies. Our problems are being treated as everybody’s problem and therefore nobody’s. All in all, gold is a good thing to have…
There was a time when gold was money. In today’s uncertain world, gold is back in fashion. Part of gold’s role is that it is a barometer of uncertainty. The biggest driver though is that as an inflation hedge against depreciating currencies, negative US real rates and geopolitical uncertainty. Gold is the canary in the mine. It warbles today. Are we listen to its warnings?
Gold was one of the best performing assets during the first half of 2020, but in a few days, gold was caught in a flash crash, dropping $100 as 30,000 gold contracts were dumped on Comex, equivalent to 3 million ounces. The Comex and physical markets are two separate markets and while there has been steady buying of physical gold in the past two years, lead by the central banks, Comex on the other is a paper market and subject to short-term manipulation because it is outside the purview of the SEC. History shows that the moves tend to be “transitory” and an excellent purchase opportunity.
Central Banks Continue Buying Gold
Central banks bought 90 tonnes this spring and data player Palantir Technologies bought $50 million in gold bars in August. Amid fears of the Taliban takeover, the US froze $9.44 billion of Afghanistan’s international reserves including $1.4 billion of gold, depriving the new regime needed cash and an economic lifeline. For nations, gold is a reserve asset. Gold has since recovered and the flash crash did not change market fundamentals. The last two gold cycles saw peaks in 1980 and 2019 and each high surpassed the previous peak. Despite the pullback, we believe that gold remains in a bull market and expect the next peak at $2,200 an ounce.
***ALSO JUST RELEASED: FINALLY SOME GOOD NEWS: Takedown Fails As Gold Snaps Back Above $1,800 And Mining Stocks Soar 5% CLICK HERE.
***To listen to legend Rob Arnott discuss what he is doing with his own money right now and what he thinks is next for major markets, inflation and much more CLICK HERE OR ON THE IMAGE BELOW.
***To listen to to Alasdair Macleod discuss what the bullion banks are up to in the gold and silver markets and what to expect next CLICK HERE OR ON THE IMAGE BELOW.
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