Tag Archives: Gold

Imploding credit — the consequences, by Alasdair Macleod

Posted on October 8, 2022 | Leave a comment

Keynesian economics says you can’t have inflation and recession (or depression) simultaneously. The real world says different. Alasdair Macleod explains. From Macleod at goldmoney.com:

There is a growing realisation that the world faces a combination of persistent inflation of prices and a recession at the same time. The factors driving both are visibly intensifying. Those of us versed in the cycle of bank credit are aware that it is the contraction of bank balance sheets which is driving the recession, while it is continuing currency debasement driving inflation.

Neo-Keynesians in the establishment think the current position is contradictory, that current rates of price inflation will decline back to their 2% target in a recession, and interest rates can then be reduced to stimulate economic activity. 

The key to understanding why prices can continue to rise in a recession requires a fuller understanding of the role of credit in an economy and what it represents. Its role is far greater than commonly thought, with considerably more than several quadrillions of dollar equivalents outstanding. All economic activity and wealth are credit. This article sketches out the various types of credit, and how credit equates to our collective wealth.

It also requires us to differentiate between a currency which is anchored to gold specie and one without a specie anchor. The former imposes a discipline on the state of non-intervention, while the latter encourages intervention. It is that intervention which leads to fiat currencies and all credit based upon it finally collapsing.

The importance of credit

That the monetary authorities do not understand credit might seem unbelievable. But evidenced by their actions, it is the only explanation for their mistakes. Clearly, as well as credit they don’t understand the importance of money, having banished gold from its role of anchoring the purchasing power of credit. The vested interest of replacing gold with currency, to obtain for governments the benefit of unfettered debasement, is ignored or forgotten by today’s state-educated economists and commentators. Disregarding what drove the dollar off the Bretton Woods standard in the first place, the establishment in the broadest sense can no longer distinguish between credit and legal money.

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The Top 3 Outcomes As the Elites Try To Reset the International Monetary System, by Nick Giambruno

Posted on October 5, 2022 | Leave a comment

All monetary roads eventually lead to gold, and perhaps Bitcoin. From Nick Giaumbruno at internationalman.com:

Reset the International Monetary System

It’s self-evident the fiat currency system centered on the US dollar is self-destructing at an alarming rate.

After more than 50 years, it’s long past the end of its shelf-life, like a carton of spoiled milk.

Even the elites running the system can see that and are openly talking about what they’d like to see come next.

That’s why there’s all this talk about a “reset” as the current international monetary system falters.

The way I see it, there are three possible outcomes.

Outcome #1: Central bank digital currencies (CBDCs) and the International Monetary Fund’s Special Drawing Rights (SDR) replacing the US dollar as the world’s new reserve currency. This is the elites’ preferred outcome.

Outcome #2: A reluctant re-monetization of gold. Central bankers don’t want to go back to gold, but they will have no choice if their fiat system collapses, forcing their hands.

Outcome #3: Bitcoin is the wild card. A Bitcoin standard could spontaneously emerge regardless of what the elite want. Bitcoin is an entirely new asset people are adopting as money because of its superior monetary properties, notably its total resistance to inflation.

It’s good to keep Bitcoin’s long-term monetization trend in mind. However, both gold and Bitcoin will likely do very well in the short and medium-term as fiat currencies lose value.

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CBDCs, SDRs, and the Re-Monetization of Gold, by Nick Giambruno

Posted on September 28, 2022 | Leave a comment

Banks and central banks relentlessly debase their fake money, they are setting the stage for the return of real money, gold. From Nick Giambruno at internationalman.com:

Central bank digital currencies

The current monetary system is on its way out.

Even the central bankers running the system can see that.

That’s why they are preparing for what comes next as they attempt to “reset” the system.

It’s important to emphasize that nobody knows what the next international monetary system will look like—not even the elites. However, they know what they want it to look like and are working hard to shape that outcome.

Next, I’ll examine their preferred outcome.

Plan A: CBDCs and SDRs

The new international monetary system the central bankers would prefer involves central bank digital currencies (CBDCs) and the International Monetary Fund’s Special Drawing Rights (SDR) replacing the US dollar as the world’s new reserve currency.

Despite all the hype, CBDCs are nothing but the same fiat currency scam with a new label on it—and zero privacy. They will make it even easier for the government to inflate the currency, and that’s what I expect them to do if they impose CBDCs on us.

However, it’s doubtful CBDCs can save otherwise fundamentally unsound currencies—as I believe all fiat currencies are.

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Gold has never been so attractive, by Alasdair Macleod

Posted on September 23, 2022 | Leave a comment

Sooner or later, probably sooner, real money is going to catch a bid and never look back. From Alasdair Macleod from goldmoney.com:

In our lifetimes, we have not seen anything like the developing economic and financial crisis. Rising interest rates are way, way behind reflecting where they should be.

Interest rates have yet to discount the continuing loss of purchasing power in all major currencies. The theory of time preference suggests that central bank interest rates should be multiples higher, to compensate for the current loss of currency purchasing power, enhanced counterparty risk, and a rapidly deteriorating economic and monetary outlook.

There is no doubt that the majority of investors are not even aware of the true scale of danger that interest rates pose to their financial assets. Some wealthier, more prescient investors are only in the early stages of beginning to worry. But if you liquidate your portfolio, you end up with depreciating cash paying insufficient interest. What can you do to escape the fiat currency trap?

This article argues that having everything in fiat currencies is the problem. The solution is a flight into real money, that is only physical gold — the rest is rapidly depreciating fiat credit. Owning real money is the only way to escape the calamity that is engulfing our current economic, financial, and fiat currency world. 

Avoiding risk to one’s capital

From conversations with family and friends, one detects an uneasy awareness of increasing risk to investments. There are two broad camps. The first and the majority are only aware that interest rates are rising, and their stocks and shares are falling in value but fail to make the connection fully. The second camp is beginning to worry that there’s something very seriously wrong.

Investors in the first camp have usually delegated investment decisions to financial advisers, and through them to portfolio managers of mutual funds. They have taken comfort in leaving investment decisions to the experts, and besides the odd hiccup, have been rewarded with reasonably consistent gains, certainly since the early noughties, and in many cases before. They trust their advisers. Meanwhile, their advisers are rewarded by the volume of assets under their management or by fees.

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History Repeats: Abandoning Sound Money Leads to Tyranny and Ruin, by Jp Cortez

Posted on September 10, 2022 | Leave a comment

You can tell all you need to know about a country by the quality of its money. Fiat debt instruments whose usage must be compelled via legal tender laws are pure garbage, the last resort of corrupt and dying governments. From Jp Cortez at soundmoneydefense.org:

Money is one of the most misunderstood topics of our time, and we’re seeing the implications of this play out every day.

To understand money, one first must first understand that human beings have always been incentivized to participate in exchange. If humans could not, or did not, trade, the majority of people would die young: whether by starvation, disease, or exposure to the elements.

The survivors would be left with an extremely low standard of living; not a world any of us would want to live in. This means that exchange is a necessary condition, not only of our economy, but of human flourishing.

Origins of Money

Before there was money, there was barter (also known as direct exchange) – a system in which every good is traded directly against every other good.

A small island economy could function this way: a couple of coconuts traded for fishing line, or a bushel of bananas in exchange for bamboo with which to build a shelter.

As Tho Bishop from the Mises Institute illustrates, imagine that a farmer wants to buy a pair of boots, so he visits the town cobbler and tries to trade a dozen eggs in exchange. However, the cobbler in town doesn’t want eggs. The cobbler might want beef, but the farmer isn’t willing to slaughter his cow for boots.

A trade where both parties are happy is now difficult. It’s easy to see how unmanageable this system is as populations grow, and as needs and wants expand.

Let’s revisit our farmer: Instead of offering eggs, he realizes that what the cobbler really wants is butter. So he goes out and trades for butter, and then uses that butter to trade for boots. If enough people also want butter, our farmer may buy more—not to use it, but to exchange it for other goods and services. This is called indirect exchange.

Many goods throughout history, with varying degrees of effectiveness, have filled the role of “butter.” Salt, wampum, and tobacco have all been used as money, just to name a few. However, gold and silver emerged as universally accepted monies by the free market because of their durability, transportability, fungibility, and scarcity.

Emerged is the key. The process through which money is “created” is not one of central planning or of creation at all, but rather one in which money is “discovered” by markets.

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Here’s Why Thomas Jefferson Would’ve Had Jerome Powell Arrested, by Ron Paul

Posted on August 23, 2022 | Leave a comment

Counterfeiting is illegal, and there’s no bigger counterfeiter on the planet than the Federal Reserve. Those Federal Reserve Notes in your wallet or purse aren’t money, they are fiat debt instruments, or counterfeit money. From Ron Paul at birchgold.com:

Why Thomas Jefferson Would Have Jerome Powell Arrested

Before we get started today, I want to tell you a story about the former military dictator of Uganda, Idi Amin. During his eight years in power, the economy and infrastructure of the nation collapsed thanks to years of neglect and abuse. Amin took a familiar economic approach to his nation’s economic crisis – he had more money printed.

In fact, he personally negotiated a print run of 2 million in banknotes with a British company – at the end of the negotiations, the company’s salesman asked how they’d be paid for this service.

Amin dismissively replied, “Print 3 million and take 1 million for yourself.”

As you might expect, a planeload of new banknotes didn’t help solve Amin’s economic problems. He doubled the nation’s money supply in his last two years as dictator, absolutely flooding the nation with paper money. His people had money, but they didn’t have wealth because prices naturally skyrocketed. (Amin couldn’t really ask for economic advice as he’d had “intellectuals,” along with the former leader of the national central bank, Joseph Mubiru, executed.)

Throughout history, governments and citizens have repeatedly made the same mistake. Money isn’t wealth. And our Founding Fathers knew it…

The Founding Fathers knew what money was

The Coinage Act was passed by the Congress of 1792, which established the silver dollar as the unit of money in the United States. Along with silver dollars, the Act specified three gold coins (a $10 eagle, a $5 half-eagle and a $2.50 quarter-eagle) and smaller silver denominations – half dollars, quarter dollars, “dismes” and “half dismes” (dimes and nickels).

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Doug Casey on the Rise of Alternatives as the US-Led Global Order Falters

Posted on August 4, 2022 | Leave a comment

Gold will emerge as the world’s money because nobody trusts fiat currencies. From Doug Casey at internationalman.com:

US-Led Global Order

International Man: Since the invasion of Ukraine, we’ve seen the US and its European allies institute unprecedented sanctions on Russia. In a bold move, the US government also froze the US dollar reserves of the Russian central bank.

In response, Russia demanded payment in rubles in exchange for its energy.

What’s your take on this new phase of economic warfare?

Doug Casey: It’s a massively stupid and destructive move on the part of the US. There’s no upside to what the US is doing in fighting this economic war against Russia—or, for that matter, in backing the Zelensky regime in the Ukraine—but huge downside from every point of view.

Essentially the US and Western powers have confiscated hundreds of billions of dollars of assets from the Russian government, as well as individual Russians. It’s theft, pure and simple. It acts as a warning shot to everybody in the world: Your assets are not safe in Western countries. It’s a reason to get out of the US dollar and use something else.

It’s backfired on the US. It’s helping devastate Western economies by cutting off the flow of Russian oil, and especially natural gas, to Europe. Further, the Russians now demand payment in rubles. The ruble is now a much stronger currency because, in order to pay the Russians, the world has to buy rubles. The Russians have taken a page from the US playbook. Decades ago, the Saudis said they would only accept US dollars in payment for oil. And so, people had to buy dollars if they wanted Saudi oil.

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Gold and the upcoming recession, by Alasdair Macleod

Posted on July 25, 2022 | Leave a comment

Central banking and fiat debt create the boom and bust mistakenly attributed to capitalism. The boom is now giving way to the bust. From Alasdair Macleod at goldmoney.com:

We are now seeing the initial stages of a currency, credit, and banking crisis develop. Driving it are an inflation of prices, contraction of bank credit and a pathological fear of recession. One can imagine that the major central banks almost wish a mild recession upon us so that they can keep interest rates suppressed and bond yields low.

The key to understanding the course of events is that the cycle of bank credit is turning down, and this time the factors driving contraction are greater than anything we have experienced since the 1930s, and possibly in all modern monetary history.

This article joins the dots between inflation and recession and puts the relationship between money (that is only gold), currencies, credit, and commodity prices into their proper perspective.

The bank credit downturn…

It is increasingly obvious that the economic cost of sanctioning Russia is immense, and there’s now growing evidence of all major economies facing a downturn in economic activity. And we don’t have to rely on GDP forecasts to know why. Intuitively, if food and energy shortages impact us all, higher prices for these items alone will affect our spending on less important items and services.

That’s reasonable enough for sensible citizens. But financial analysts insist on quantifying it with their models. Their principal measure is the total value of all recorded transactions, comprised of GDP. They proceed seemingly unaware of the difference between the value of economic activity to the advancement of the human condition, which can’t be measured, and a meaningless total comprised of only currency and credit, which can. Consequently, all they end up recording is changes in the quantity of currency and credit deployed in the economy.

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Beware Of Markets Full Of Fool’s Gold, by Egon von Greyerz

Posted on July 14, 2022 | Leave a comment

There’s fools’ gold, and then there’s the real thing. From Egon von Greyerz at goldswitzerland.com:

Fool’s Gold comes in many guises, whether it is in fake paper money, Ponzi investment schemes, fake and manipulated gold derivatives, Bitcoin or just fake gold discoveries in Uganda, all of which are discussed in this article.

‘The tendency of an inconvertible paper money is to create fictitious wealth, bubbles, which by their bursting, produce inconvenience.’ – Lord Liverpool 1810 (UK Prime Minister 1812-27)

The elegant and understated courtesy of the English is well known. “Inconvenience” is for an early 19th century aristocrat what a modern Englishman today would call “bloody mess.“

Confucius described this trait already 2,500 years ago:

“The noble-minded are calm and steady. Little people are forever fussing and fretting.” – Confucius

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Inflation, recession, and new currencies, Alastair Macleod

Posted on July 1, 2022 | Leave a comment

The best economist on the Internet analyzes the fiat-money landscape, its inevitable collapse, and what could potentially replace it. From Alastair Macleod at goldmoney.com:

Central bankers are trying to steer markets away from higher interest rates, citing growing evidence of the harm they are doing to economic growth. Quantitative tightening is dead on arrival.

Predictably — because it is a repetitive cycle — bank credit is beginning to contract. But contracting bank credit is associated with periodic systemic crises. The credit contraction crisis promises to be even worse than the Lehman failure and any that came before it. And because central banks are sure to protect financial asset values from collapsing, their currencies are likely to suffer instead. Being entirely fiat unbacked by legal money, currencies are dependent entirely on the public faith in a financial system which lacks the backing of real money. 

We are all rapidly drifting onto the rocks which sank John Law in 1720. Central bankers, like John Law with his Mississippi bubble, are prioritising support for financial asset values over their currencies, which is what interest rate suppression is all about. Just as Law’s fiat livres rapidly became worthless, so will today’s fiat currencies.

Therefore, in the interests of one’s own self-protection, it is time to fully understand the difference between legal money, fiat currency and the importance of bank credit.

Central banks refuse public access to legal money, which is their gold reserves. Nor is access demanded by the investment establishment, which has thrived on monetary inflation. Instead, there is a developing debate about collapsing currencies being backed by commodities instead. This article puts these developments into context.

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