An important anniversary slipped quietly by last month without any fanfare, on August 15th, as the anniversary of the day, that President Richard M Nixon, closed the Gold Window, and put the world on the path to financial armageddon.
From that day to this, the U.S. has essentially been able to print up as many dollars as it felt it needed to pay for things it wanted, and forced the rest of the world to accept “funny money” – aka. – Fiat Currency.
The fact that they were able to strengthen the dollar in 1973, temporarily when it convinced Saudi-Arabian leadership to accept an offer it could hardly refuse is still highly relevant…
America would back the House of Saud, with the full military might of its national forces, and the Kingdom of Saudi-Arabia (KSA), would accept only U.S. dollars for its oil, forcing dozens of other countries to trade for dollars, to pay for that oil, and the KSA, would re-invest those surplus dollars in Treasury Bills. Eventually the rest of OPEC would be forced to follow suit or commit commercial suicide.
Over the last 9 months, events in the precious metals markets and geo-political and economic circles, world-wide have been making headlines.
As geo-political tensions rise around the world, I wonder out aloud what is the end game. To learn where we are going, it’s important to know where we’ve been, and we have to look back 40+ years.
If we look at the ageing baby-boomers who are retiring in droves here in the west, (Of which I am one) and as our spending patterns change, we need to understand why this has such a big impact on economies.
In my experience, young people spend their money on a handful of things – Music, Fashion, Booze, travel and generally having fun, primarily in their pursuit of their partner in life – irrespective of their sexual proclivities.
As these people mature, they buy a bike/car, and their first flat or small starter home, and all the essentials of normal urban life – beds, tables, chairs, sofas, kitchen gadgets etc.
Then as they pair and begin to settle down, their partner now safely esconced in their home, perhaps 5 years have passed, and two incomes in one household means for a while they can experience a rise in social status and maybe buy a bigger home or have more expensive holidays. (though things are a little different in recent years as gap year students take the young to the far-flung corners of the globe.)
With women now making up more than half the working population in the west, women are now leaving “bonding” later, and perhaps seeking someone who meets and exceeds their expectations, and thus probably for professional women (i.e. those with degrees and/or professional qualifications) they’re leaving the having of children until they are in their early 30s, or as late as early 40s causing problems for over-stretched maternity departments, and over-stretched National Health Services, as increased age introduces greater risks and higher costs.
By their mid-thirties, people are climbing the corporate ladder, getting increases in pay, generally as their productivity rises in line with their experience.
Output on a national scale rises but this is only temporary unless higher investment in capital goods (new vehicles/machinery etc., that gets goods to market quicker, and/or cheaper) increases productivity further, these gains are not carried through indefinitely though. This is where political mistakes are made, as politicians think that the growth will continue.
As people hit their forties and early fifties, their willingness to learn unless pushed, seems diminished as they become experts in their field, just at the time newer technologies are adopted by the young first.
By the time people hit their mid 50s and early 60s, their abilities are beginning to decline; health issues begin to rise on average and national governments see a fall off in taxes, as some retire early, or die young – though the demands on their national budgets increase as improvements in health-care put additional burdens on national budgets.
Intermittent overseas wars also add to these burdens as those apparently with historical empires adopt the role of world policemen.
This adds further financial burdens on countries, and leads to overspending to maintain prestige, or to appease emotional electorates, or to maintain their leadership role, allowing those with more quiescent military to improve and begin spending in increasing amounts.
This was the nature of things in the west when Britain began losing its pre-eminence, and the U.S. took up the political and economic cudgels.
As a result, we now see the extent to which Britain, and America have over-spent in recent years, as the U.S. deficit grows to 105% of national income, and its budgets become overstretched as its military tentacles have extended now to over 145 countries.
The role of World policeman is an onerous one, and like all great empires this eventually causes a collapse at home, due to excessive spending as tribute (the term used by the Romans to refer to taxes) begins to lessen.
As demographics affects all economies, those with rising populations have greatest demand for housing, food, water and the other essentials of life, and when economics fails to meet those requirements, people look for scapegoats. Those with the most usually get the most scrutiny and criticism.
But to get back to the title of this piece, where will this ultimately lead us?
As Vladimir Putin, and Xi Jinping, grow their economies, and grow increasingly wary of U.S. dollar hegemony their actions have consequences for all of us.
China has in recent years agreed bi-lateral trade deals with a rising number of countries to reduce the dollar from its trading, and China in particular has used its excess dollar reserves to buy increasing amounts of Gold and Silver, and overseas resource assets with precious metals and other precious resources for its industries.
Russia too has sought to lessen its dependence on dollars, and the BRICS Development Bank recently announced, will wean these emerging economies off the dollar as the $100billion in Capital gets used to help out economies in difficulties. Will some of this capital be used to buy Precious Metals? It would appear so, as China now trades more Silver in physical metal form, than the COMEX, the former leader in precious metals derivatives trading.
This will ultimately lead to a dollar collapse, and like a wounded animal, this may lead to the U.S. lashing out to protect its interests, as it has been in the middle-east and in Ukraine, where fights to protect access to middle-eastern oil, paid for with dollars, and for access to Ukrainian agricultural land are being waged by proxy military. But the collapse of the dollar unless mitigated by the increasing energy production, may cause the whole world economic woes, or worse.
This involvement in the middle-east has caused many of the problems as those with a different view of the world seek to eliminate western ideologies from their countries. These skirmishes though, may grow to encompass those other major economies – China and Russia.
James Dines, the economic mind behind the Dines Letter and Dr Paul Craig Roberts former adviser to Ronald Reagan, also thinks that we are on the verge of a major conflagration and James Rickards a CIA adviser on financial matters, in a recent interview claims the U.S. is staring down the barrel of an economic gun.
But also in January 2014, the United States government entered into a deferred prosecution agreement with JPMorgan Chase which is the biggest bank in the United States and one of if not THE biggest banks in the world giving those who have benefitted most from the financial mess the U.S. has gotten itself into essentially a free pass.
The recent prosecutions of Financial Institutions has resulted in fines being paid, and JPM – probably the biggest offender, has paid approximately $29 billion in fines – yet not one senior banker has done any jail time.
When Janet Yellen begins the next round of Quantitative Easing (which might be called something else) all hell will break loose in the precious metals markets.
Buying Silver… Why NOW?
The reasons are not so obvious.
Silver is collectively, a monetary metal, an investment vehicle, and an industrial material.
Silver’s role in international finance has been prominent over several millennia, as this shiniest of metals was used in Roman currency, and only when Emperors devalued the money by reducing the silver content of coins, did they suffer the wrath of the people. (See: The Coming Battle – 2013)
Industrially, silver is the most widely used commodity on the planet, reputedly used in 10,000 applications and rising. Second only to oil in importance, but its price has been walked lower for decades, as silver was first taken from its pre-eminent role in both American and Chinese money with its removal from the dollar, to junior partner, to minimalist role, and finally in 1964 to negligible role as U.S. currency removed the last remnants of the metal from American currency.
Is it significant, that just 7 years later, on August 15th 1971, the last vestige of precious metals, was removed from the American financial system?
If the death of President Kennedy, and Louise Auchincloss Boyer are anything to go by, I think so.
But silver’s western denouement, means that the East has been able to accumulate this most precious of precious industrial commodities at prices unlikely to be seen again, after this financial collapse begins in earnest.
Silver historically was bought in ratios circa 16:1, compared to gold. We see evidence of this still all around us – 16 ounces to the pound, in the U.S. – 16 fluid ounces to the Pint and this ratio has varied in recent years as silver’s role in monetary matters has been slowly extracted, but its time will come again – it always does…
And with the current Silver/Gold ratio of circa 65:1 when it does go up, because it currently comes from the earth at circa a 9:1 ratio, then its rise will be meteoric.
And if that wasn’t reason enough to be accumulating…
These links should help you make up your mind…
And this page shows you were you can STILL buy silver coins and bars at VAT free prices, and have them discreetly shipped to your door.
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