How will the world’s monetary system realign when the world must face the consequences of fiat currency and debt expanding at a rate far in excess of actual production? From Raúl Ilargi Meijer at theautomaticearth.com:
It’s been a while since we last heard from Dr. D, but here he’s back explaining why neither gold nor the yuan nor cryptocurrencies can or will replace the dollar as the reserve currency, but together they just might:
Dr. D: “Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.” –Ogden Nash
Over the last year or two there’s been discussion about the U.S. Federal spending moving beyond $4 TRILLION dollars, and whether a $1+ trillion dollar annual deficit, on top of a $20 Trillion national debt – Federal only – is sustainable. It isn’t.
“What can’t go on, doesn’t” is the famous quote of economist Herbert Stein. Since a spiraling deficit of $1 trillion deficit on a $20 trillion debt can’t go on, what will we replace it with when it very soon doesn’t? Historically gold. Whatever gold exists in the nation’s coffers, whether one coin or 8,000 tons, is used to as the national wealth, and fronted by paper to re-boot the currency. With some additions such as oil and real estate, this was the solution in Spain, France, Germany, and the Soviet Union among hundreds of fiat defaults. Why? Because at a time of broken promises — real goods, commodities that can be seen, touched, and used – are the tangible proof of wealth, requiring no trust, and from which the human trust system of paper and letters of credit can be rebuilt.
But in these complicated, digital times perhaps that’s too simplistic. Perhaps we have grown smarter than all our fathers and this time it will be different. Will it really be the same? Let’s look at how the system works now.
Before WWI, the world was on the gold standard. This had variations, exceptions, corruptions, but on the whole there was gold in the back that was fronted by paper promises issued by private banks. The paper moved, the promises were delivered by telegraph and telephone, and the gold remained in the vaults. It was only when men felt unsure of the truth of the promise they could and did demand delivery, called the bluff, and the bank did – or ominously didn’t – deliver the gold, and thereby keep the paper system in line with reality, with real wealth, and with the economy. This method kept men and nations honest, mostly.
The main part is that the gold didn’t move: it stayed in the same vaults and its ownership changed, just like today. It didn’t matter how much gold existed: it simply changed price, just like today.
To continue reading: Gold Yuan Crypto