Demise of the Dollar
Central Bank Manipulations?
The reason Gold has not exploded yet, is because Gold as a physical asset, is undervalued in the West (in general), and highly valued in the East for historical reasons. (Partly as a result of Western Central Banks, having too much power, and thus ensuring regulation gets passed to limit Gold’s usefulness as a store of wealth and partly, because the Chinese had their education in paper currency back in the 11th Century, and others in the Far-East had their education more recently, with the currency crises of the late 1990s.)
As Gold heads east, it is in the interests of those who wish to accumulate it, to play devil’s advocate and allow the manipulations to continue. As I stated in my last post, both Russia and China, are unimpressed that when they sell goods on International Markets, they receive a depreciating currency, that can be conjured up out of thin-air [or to be more accurate – digits on a computer] by its manipulators…
When the Tide goes out (to borrow a phrase used by Warren Buffet) i.e. When Gold becomes part of the process for settling International Trade again, then we will see who is wearing no shorts – (i.e. a fast-reversal back to Bretton-Woods) i.e. which countries, are spending more than they earn – Internationally speaking – and who is managing their economy well, by exchanging physical goods, for physical goods (in the form of physical Gold, or a gold backed currency which can be exchanged for Gold)
China’s approach is therefore like an aeroplane coming into land, and on the approach path to forcing the world’s trading nations to stop using currency inflation to buy up scarce natural resources, and Gold will at that time achieve its real value.
That time will happen when the first country breaks ranks, and demands Gold for its goods, and has enough Gold to withstand a draw of its currency for International Trade, and the only country that comes even close to that is China (and perhaps Russia) and therefore when China finally – officially – releases its Gold holdings – which Pravda in a recent article suggested was 30,000 tonnes, (because they have re-smelted their Gold, and re-cast it into 1Kg bars) then the value of Gold will achieve the exponential rise we have all been expecting.
By end 2015, China, has to float its currency, (WTO regulations) so perhaps is hedging its bets, by holding huge Gold reserves to act as a floor under the value of their currency. Reference – http://english.pravda.ru/news/business/21-05-2015/130683-china-0/
That to me makes perfect sense. It will also mean those countries of Africa, South America and other developing nations, who sell raw materials, will experience rapid rises in living standards, and many will end up paying their political masters huge sums, unless the corruption that has been endemic in some of those countries, suddenly vanishes. (Just as happened during the 1970s which may in itself cause other problems as it did, during the decade and the one following.)
Of course, the poor westerner, will experience rapid price inflation for all their most important needs. And those countries who use the American Dollar as their currency system, would be well advised to consider a replacement.
Food, and raw materials, such as oil, gas, copper, tin, lead, zinc, and precious metals, too will all be more highly valued.
Those with good stores of these commodities, will flourish, those who depend on government largesse for their income, will not fare so well.
And paying for things internationally, will require some form of internationally accepted money – one I have been reading quite a bit about in recent weeks is BitGold.
This manages to marry the best of both crypto-currencies, and precious metals.
To widen your reading and viewing material, you might like to visit these channels on You-tube, and search terms and web-sites.
Recommended YouTube Channels:
Ron Gibson – WhatReallyHappened 2015 (Mike Rivero),
Mike Maloney – GoldSilver.com – WealthCycles,
YouTube Search Key Words:
Dr. Paul Craig Roberts,
Jim Murphy (GATA),
G. Edward Griffin,
John Williams, (or Shadowstats.com)
Catherine Austin Fitts,
Some weeks ago, before Xmas, I floated the proposition that “The West” might be about to shoot itself in the head, heart, AND foot, just to make sure.
My reasoning was that Russia, might be about to demand payment in Rubles for their gas and oil and other things, which would effectively shoot the west in the aforementioned organs, as they sought to ratchet up pressure on President Vladimir Putin.
The U.S. through its monetary influences and power in International Organisations – the World Bank, the IMF, BIS, Federal Reserve, and of course the ECB, Bank of England, U.N. and Bank of Japan etc, is waging a war against Russia, in a vain attempt at defending and extending its influence in the middle-eastern region, and throughout the near east, ostensibly to protect itself from the rise of China and a resurgent Russia. (more of which later)
The beginnings of this madness began with the end of the Soviet Union. The west in NATO, and through European organisations made agreements with the Soviets, to not encroach into former soviet countries, yet many of those countries, in order to avoid the risk of re-colonisation, chose to join the North Atlantic Treaty Organisation (NATO) and/or the European Union. (E.U.). This was also of course to strengthen the U.S’s Federal Reserve backed monetary system, which as I’ve mentioned numerous times is now no longer backed by physical precious metals.
Of course, when the U.S., under its attempt to extend its influence in the region, encouraged the western larger part of Ukraine to throw off its recently elected leader as it were, to rub Putin’s nose in it, and incurred the wrath of the Crimean Russians, and the Russian speaking ethnic Russians east of the Dneiper River, it essentially wandered into Russia’s back-yard, and that was the straw that broke the camel’s back.
The Crimeans, who are predominately ethnically Russian, were backed into a corner, as the new western backed government in Kiev, made the Russian language illegal.
Imagine if you were a Welsh speaking Welsh person, and the incoming British government, made your language illegal? Or Irish? or Highland Scottish and they tried to make Gaelic illegal?
You’d be pretty PO’d too…
The Crimeans, who felt Russian, spoke Russian, and historically WERE Russian – If we remember our history – Balaclava, near to Sevastopol, on the western coast of Crimea, is where the British Light Brigade, charged the Russian guns, to such detrimental effect, in 1854, and it is remembered in the rousing poem by Alfred, Lord Tennyson. So, a hundred and fifty years ago, this part of the world, was as Russian as it surely is today.
The President, of Russia, kept a low profile recently, and even disappeared from view for ten days, prompting mass media speculation by western media about his health. Of course, when he reappeared, the President issued a wry smile, and joked about “gossip”.
But behind the scenes, the Russian bear is fighting back against the Dollar hegemony. Of course the war of words is being ratcheted up as American military conduct war games in Estonia, this week-end, a former Soviet satellite nation, and right next to the Russian mainland.
Guyane Chichakyan a journalist for RT, posed an interesting question to one of the U.S. government’s PR spokespersons today (Saturday) when she asked Jeff Rathke of the U.S. State Department: Why was it that when Russia conducted military exercises on their own soil, it was supposedly raising tensions, but when Americans conducted military exercises several thousand miles away from home on Russia’s borders, it was in the guise of international peace and security.
The PR guy nearly choked on his reply, denying that they had ever said such a thing, to which, RT showed a clip of Jen Psaki of the U.S. State Department, on August 14th, 2014, doing just that, when referring to events in Ukraine and close to the Ukrainian border. As I mentioned some months ago, the next world war has already begun as a war of words, and for people’s hearts and minds. Every channel, both public and private will be used. It will in all inevitability end in a military war, though perhaps not on such a full-scale as the last one in 1939.
But perhaps also the anti-U.S. state of mind is gathering steam… As I mentioned some weeks ago, Britain applied to become a founding member of the AIIB (Asian Infrastructure Investment Bank) the alternative to the U.S. dominated World Bank and IMF, and we hear from the New York Times, that now Germany, France and Italy wish to join in defiance of U.S.’s (cough) “requests”.
Perhaps the dollar’s end as a major world currency is finally coming to an end, as a result of the mass Q.E. exercise of recent years.
It is time we all engaged our brains.
And then last week, I read this… http://russia-insider.com/en/2015/03/19/4696 which discusses just that.
If a shooting war does begin in earnest, money – hold in your hands money – will allow you to survive the inevitable inflation that will ensue, and the grey market will offer up far more than the government enforced, and controlled ones. If you value your freedoms, liberties, and the health and well-being of your family and friends, I strongly suggest you begin preparing – if you haven’t already.
Gold and Silver coins and widely accepted silver and gold ingots of widely known mints will prove to be good ways to secure your own future “essentials”. And Bitcoin, and other [Alt-coins] will enable international transactions. You can begin your own FREE collection of these precious [Alt-coins], when you set up an account by merely supplying an e-mail address.
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.
And you can get further news on these matters at:
I am reminded of the above childhood refrain from days spent playing “Hide and Seek”, with regard to the economic malaise that I and many others foresee coming to a country near you in the not too distant future – whether YOU are ready or not.
Harry Dent, of Dent research, thinks we are in for a period of deflation, and even prophesizes that the markets and Gold price will tank with Gold possibly heading down to $750.00/oz, with a major stock-market correction in 2014. And Goldman-Sachs has re-iterated its forecast that Gold will drop to $1050.
Seven years ago, Mike Maloney of GoldSilver.com, had a more nuanced grasp on monetary matters, even if Harry Dent perhaps understands economics and Demographics better. Mike Maloney suggested we would have minor inflation first, followed by a period of deflation, which will initiate a Central Bank helicopter drop of currency, and THAT would bring about the final epic period of inflation which will bring about the new financial order and even perhaps the New World Order, that so many seem to have been prophesizing.
Former Fed Governor, Ben Bernanke was famously called Helicopter Ben, for suggesting that in extremis, a committed government or Central Bank could create inflation by dropping currency from a helicopter. It is a tag he has never quite lost. And Janet Yellin seems to be Bernanke’s biggest protégé.
For me, I choose to follow my instincts and try to wind my way through the differences of opinion. I am also a great believer in history repeating itself. Especially when the same or similar circumstances prevail.
Demographics drives personal spending patterns, as Dent has proved, but Central Banks and Governments have a habit of reacting to those events. Some, like the Americans and Europeans, lend that newly minted Central Bank money to the Senior Banking sector, in the vain hope that the banks will lend that money into the economy. (Or merely to prop up those banks?)
Governments spend money on infrastructure projects, which they are pretty certain will boost the economy. Witness the Tory Government of Margaret Thatcher giving the go ahead on the Channel Tunnel project during the 1980’s, and Britain’s New Labour Government giving the go ahead to the group that built the “Millennium Dome” (now the O2 Arena). And the current coalition’s attempts to make big infrastructure gestures with the HS2 – High Speed rail Link from London to the North West, and a new Airport for London, or an extra runway at London’s Heathrow are also in the mix.
But of course we know that when politician’s spend with one-hand, they take in taxes with the other. And that usually means you and me get to spend less on things we consider important to us.
Of course there can be an antidote to all this, and that is to improve one’s lot by saving and good investing, particularly in tax efficient investments.
The last time we had a similar set of circumstances was in 1975/76, as the inflation rate that had risen to almost 27% the previous year, fell to 8-9%, considered acceptable by many at the time.
Of course back then, this inflation prompted Tesco, to ditch the Green Shield Stamps of yesteryear, and to plan a new strategy with deep discounting, which was planned for 6th July 1977 in “Operation Checkout”.
Over the Week-end of the 4th and 5th all their stores were re-priced, and the stores became like a light to moths and other night-time flying insects. Turnover all but doubled in many stores. But of course it was the demographics that was driving the economy.
Given TESCO’s recent results, will they repeat this exercise to compete with the new kids on the block – Lidl, and ALDI?
During the late sixties, western countries had large numbers of retirees, born at the turn of the century in the late Victorian and early Edwardian eras, who fought in the 1914-18 war, and again in 39-45. These 60+ year olds were now retired and retiring in droves, spending their retirement proceeds, as they sold their pension accounts to buy bonds, driving down interest rates and stock prices with equal aplomb. These retirees who had fought – some in TWO World Wars, felt they deserved the relaxed retirement that they were promised. The world fit for heroes.
However, just as recently, in April 2012, the number of retirees in the U.S. reached 10,000 per day as those born in the aftermath of the second world war – the baby-boomers, began retiring in huge numbers, but the early retirers had already been selling their stock portfolios (or their pension companies were) as early as 2003, as the oldest ones retired at 55 or just after.
Those with a fixed lump sum to spend, put deposits down on the already rising property market, and helped in the “buy-to-let” boom of that period, and just as the profits made by the NASDAQ investors in the late 90s, also put their winnings into property, Banks were lending outrageous multiples to people in low income areas.
The Fed and government’s actions have been an attempt to mitigate these affects on the economy since. And foreign wars in foreign lands (as long as not too many of “OUR” boys get killed), is one way of keeping the economy ticking along. Economists call this the “guns and butter economy”, as an economy cannot direct resources to both with equal measure.
Anyway, as I was reading another blog, that talked about investments and the US Bond Markets, it mentioned the Fed’s requests to other nations – Belgium – to be precise – who apparently have been pressed into supporting the dollar by buying T-Bills, in the absence of the Fed, to keep interest rates from spiking, which would cause another recession, but as I read this, something crossed my mind.
What if Russia and China now decide to abandon the dollar for commodities sales to non-western aligned countries – say with Vietnam? Iran? Or how about Brazil? India? And what if others followed suit causing a run on the dollar?
This could cause an all out dollar crisis, necessitating a hike in interest rates, that would be painful to watch. But it might also stress the system and induce the hyperinflation that many fear – myself included.
Of course, if you read the book “The Coming Battle” you will know that the Fed made surreptitious loans to 20 major Banking groups in Europe of $15 TRILLION, in total – interest FREE, during the heat of the last financial crisis, and they may be now calling in that favour – requesting that these Banks buy Fed debt, to support the dollar, keeping the Gold price in check.
But, if Russia decides to avoid the dollar, then all bets are off
In my last post, I mentioned that Gazprom, would under different circumstances be possibly a good investment opportunity, and then I remembered the sage advice of Baron Rothschild in his oft quoted phrase: “Achetez aux canons, vendez aux clairons”.
For those who don’t speak french, it means figuratively – Buy on the sounds of the cannons, sell on the sounds of triumphalism (or trumpets). Put more simply, “Buy when the war starts, sell when it ends.”
Now I’m not suggesting you put 100% of your portfolio into Gazprom. But if you do your due diligence, and research the MICEX,(Moscow International Commodities Exchange) there will be opportunities, and/or some of the other Russian behemoths, that might benefit from “the return to the mean”, and there could be money to be made.
Anyone who has been investing for any length of time, knows, or will have heard, that on the average, stock prices rise in line with growth in the economy. When they temporarily exceed this price, they fall, and where they are below the average they will at some point return to the average (the mean).
Of course as many of my recent posts will no doubt have showed, the amount of currency being injected into the economy at any particular point in time, can affect certain asset prices. Of course when cash is tight (as in a recession) bank lending goes down, and thus asset prices reflect that lowering of available capital. And when banks have money to burn (so to speak) then lending goes up, and so do asset prices – particularly stocks and property.
Of course the banks take advantage of this, by lending when asset prices are cheap, and forcing foreclosure (where they have to) when interest rates become high. (which of course, they control)
Warren Buffet also known as “The Sage of Omaha” advises to buy when an asset is cheap, and to sell when the asset is dear, and has said – “Be greedy when others are fearful, and fearful when others are greedy”.
Of course the good sage also buys businesses that will never be sold, but ensures good management manage the business and give a good return on his investment. His last maor purchase that I am aware of was H. J. Heinz, of 57 varieties fame.
He also made major purchases in American Rail infrastructure, in light of the production of tar-sands, and shale oil and gas from the Bakken oil fields in Montana, and Wyoming, and north of the border in Canada which will have to be moved to refineries in the south. And given the size of the finds, this will guarantee regular shipments for years to come.
Another of Russia’s behemoths, and one slightly less well known than its bigger brother but also worth a look is Rosneft.
However, a precipitous fall in the dollar will force many stocks into freefall on international valuations, and force those who hold dollars to flee the dollar also, but into what? Probably GOLD and SILVER.
Grant Williams, who is portfolio manager of the Vulpes Precious Metals Fund, also spoke about exactly what will cause this historic rise in the gold price, as well as what it will mean for the global financial system.
There are reports out this week that the BRIC nations are going to set up a version of the IMF and a BRICs Development Bank, which could trigger the collapse. The amount of trade now being done in Yuan directly between the Chinese and their trading partners, is all a move away from the dollar, which will over time weaken the dollar’s rule as world reserve currency, and with it the U.S. Empire.
Williams also thinks the Russians want to swap oil for gold because they want to bring back gold as a monetary asset. They just want gold, and rather than swap their oil for dollars or roubles, they would rather have gold for it, and they are absolutely right to do that.
From the view, from 30,000 feet as a Central Bank, they can make those decisions. And Williams guarantees the Russian central bankers, who are in charge of their gold policy, are not worrying about whether the price of gold is $1,300, $1,200, or $1,500. They don’t care about that. They just want to own the gold. And so they are going to keep doing these deals that enable them to acquire more physical metal.
At some point, when all the smoke is cleared in the paper markets, like it did during the London Gold Pool in the late 1960s, once that gets righted, then we will know what the right price is for gold.”
We know the London Gold Pool ended finally when France and then Britain asked for $3billion dollars worth of Gold in place of the depreciating dollars, just 4 days before Nixon closed the Gold window for good (even though, he said it was temporary).
Will that happen this time? I doubt it, the U.S. and European Banks are too intertwined.
But Russia’s and China’s Banks?
Now they could do some serious damage.
But an even bigger threat comes courtesy of a number of major actors in the formation of the internet – though they didn’t know it at the time…