By Jorge Vilches for the Saker Blog
slowly then suddenly
The extremely-abused Western fiat legal tender currencies will fail As We Know Them and for good reason the euro has taken the lead. But the deep interconnection of Western economies and finances, basically “joined at the hip” – also means that the other three major Western currencies will follow. Accordingly, we shall witness a cascading devaluation of euros, dollars, pounds, and yens necessarily dragging each other down in a maddening competitive “race to the bottom”. Such devaluation will come about by their ever lower purchasing power meaning higher prices for everything, if available – either made locally or foreign — including real, effective money, i.e. physical gold bullion to be explained later. The political chaos derived is already obvious in Italy, France, the United Kingdom, Germany, Japan, the US, and Europe at large.
In passing please be advised that dollars and yens and pounds also have serious problems of their own. While under current circumstances the Russian Ruble and/or the Chinese Renminbi (a.k.a. ´yuan´) would actually not be that much negatively affected and may even possibly end up with the opposite “problem” of over-valuation. But if that ever happens it would mean the least of troubles. As the Russian proverb goes “The marvel is not that the bear dances well, but that the bear dances at all.” Today´s financial conundrum for any nation-state is simply to keep “dancing” somewhat somehow somewhere with the right “somebody” in exchange for the right “somethings” reliably delivered.
The “Russian sanctions” boomerang hollowed out Europe´s economic underpinnings. Accordingly, the euro started its downfall as the most visible negative outcome derived from the EU´s unwarranted Russophobic policies. Meanwhile, both Anglo-Saxons Plan A (“lets all rape Russia together”) and alternate Plan B (“lets rape Europe with UK help instead”) have unfolded in plain sight. So with the sudden and sharp devaluation of the European euro — and with the realization that plan A is now fully out of the question — now plan B is getting ready to kick in. In parallel, it is now becoming clear that the world will probably split into two competing areas, in which case the BRICS-non-NATO countries will need to find and implement their own currency — possibly based on commodities — something which requires time and negotiations. Or quite possibly through a brand new international BRICS bank with currency swap arrangements or ´special´ SDRs as recently suggested, which also require time. So, in order to continue their “normal” lives — besides the now-troubled traditional Western currencies — all nations may also soon end up needing either Rubles or gold or Renminbis or, in some special cases, the proper barter swaps partners, formulations, and procedures based on the pivoting price of gold as reference.
The impact of the Ukraine crisis has exposed Western finances to an extraordinary process that, true enough, sooner or later was coming anyways. Although now there are also over-lapping phenomena taking place which accelerate the breakdown tempo. So, besides the counter-productive “Russian sanctions”, in broader terms the European world conquest that started in the 1500s suddenly 6 months ago found a major stumbling block. This has thrown it dangerously off-balance and jump-started the revolution duly explained to the world by Russia´s President Vladimir Putin. And because of so much legal tender currency ´printing´ – not real money but rather legally authorized claims on value – we now witness the inevitable sharp rise of prices due to the tremendous amount of bits and bytes (high demand) chasing relatively fewer products and services effectively available (low supply). So the rates that banks should offer in order to attract investors to finance such monstrous idle debt cannot be as high as needed (15% ?).
If they were, the interest accrued by the many dozens of trillions of currency debt already piled up would explode the system. Plus it would be obvious that the principal would never be returned and economic depression would instantaneously surround us. So it´s the unmanageable huge debt collapse behind it all as central bank monetization and/or taxes would have to be prohibitively high to really help out any.
Furthermore, beware: legal tender currency claims are not money and they do not extinguish debt in any way, shape, or form such as precious metals — gold or silver — actually do. Since 1971, once off the gold standard – and before that, the silver standard — legal tender currencies lack any intrinsic value and debt is very much alive and multiplying obscenely around us as we speak. Now add to this the self-harming “Russian sanctions” backfire effect and hence the European euro in 2022 has so far lost approx. 20% of its value in relation to the US dollar…and to gold. Think Plan B with more ´printed´ US dollars that curiously enough would still buy far more value than down stricken euros although neither would eventually have the real-life economic meaning that they are supposed to have. Still, never forget that fiat currencies are a legally-imposed settlement mechanism of transactions whereby value is acquired with debt.
So true, real money that extinguishes debt requires an intrinsic value in and of itself such as gold has… or at the very least the temporary backstop purchasing power that Rubles or Renminbis have for real “hard” badly needed value such as Russian energy, food produce or other commodities… or Chinese real tangible performing products or assets or technologies. Time will eventually tell and – as the saying goes — ´there´s more than one way to skin a cat´. But this “cat” here and now simply cannot continue to be ´skinned´ much longer by magnetic fields digitally representing bits and bytes clicked into existence and projected upon a CRT Cathode Ray tube screen which some Western vested interests we all know want us to believe is “money”. It is not. It is a fiat legal tender currency claim without value which is a different animal altogether. It is not a wild tiger as real money is. It is a convenient self-cleaning household kittie cat
Today´s Western legal tender currencies are mere units of account plus a means for the legal settlement of transactions with no store of (intrinsic) value thus lacking the all-important feature that real money must necessarily have. What the West has today are strict “fiat” legal tender currencies which mean ´government imposed´ paper claims often with colorful pictures of musicians or very rare animals, possibly on their way to extinction. So naturally, with any important crisis, the market reaction is quite nervous and with unstable dynamics. Investors know – or should know – that they are on their own as there is no backstop behind their ´financial´ investments. As a consequence, today’s non “money” or ´fiat legal tender currency claims´ by their very nature are definitely perishable with a life expectancy that depends upon how well they are managed but historically never lasting more than 50 years (1971-2021 ?). And they have all been very terribly managed – most especially after the 2008 GFC + Covid scare and supply chain disruptions – and basically overprinted with impunity without any relationship to the real, effective wealth value produced. After the 2008 GFC financial meltdown, the only “result” that central bankers generated was discretionary favoring of fellow bankers with free (and first) access to overinflated legal currency credit with taxpayers and future generations footing the bill.
Ref #1 http://charleshughsmith.blogspot.com/2022/07/the-only-real-solution-is-default.html + graph notes credit to Charles Hugh Smith
debt NOT growth
Hence, the humongous increase of non “money” undertaken by central banks was literally wreckless. Actually, it´s the same old gimmick but now disguised – with help from MSM specialized press – as ´Quantitative Easing´ a.k.a. “QE” which through GDP´s magic formula ends up being “growth” (not). But debt is not growth and has to pay interests, no? So now, with industrial production stabbed in the back by financial engineering, the European Central Bank (ECB) with its euro crisis alive and kicking is running desperately behind events. But the harm is already buried in and cannot be fixed as — guided by their vested interests — central bankers failed miserably yet again by just offering nothing other than 14th. century printing-press technology, a one-trick pony. The destructive financialization of the fiat non-“money” world has overgrown the underlying real-life production of truly useful products and services by several multiples. These “financialized economies” developed extraordinary fiduciary instruments, but few productive factories or services. So, for so much non “money” now the West only offers a few externalities solving real economic needs.
As Prof. Michael Hudson has repeatedly explained, printing humongous ´money´ specially for the FIRE rentier sector (Finance Insurance Real Estate) and beyond anyone else has tremendously increased Western GDPs… but did not increase at all its effective, real-life tangible products and services economy that would benefit flesh & blood human beings. The GDP formula and its 4 terms by themselves are clear evidence of such a problem. So today Western central banks have painted themselves into a far away “false GDP” corner with no effective tools, space, or time left to maneuver with or issue yet “new” forward guidance (lip service) for their “financial policies” to change such outcome.
Per multi-billionaire and Bill Gates’ partner Warren Buffett — a.k.a. the ´Omaha Oracle´ — derivatives are a weapon of Financial Mass Destruction which today would sum up a notional sum exceeding USD $ 2 quadrillion. Of these, the central bank-induced and managed “paper gold chimera” could be as high as 30%. Flat-footed as they now are, central bankers can thus awkwardly run around in circles, but they can’t ever effectively hide. They might still be kings for a little while longer but they wear no clothes.
Russian revolution 2022
And so back to the 2022 world, Russia now says “it´s our products so you pay in our Rubles, okay?” Why euros or dollars? The West plain robs them anyways, so Russia cannot give away something for nothing. Russia does not need, care to have, or find a valid use for dollars or euros which are strictly Western nonsense, not Russia´s. This includes oil + nat-gas + LNG + refined products + wheat + everything else. And the Chinese may also start gradually doing something equivalent until a new, stable, fairer, BRICS-non-NATO monetary system is developed, installed, and accepted. How the transition will unfold is not yet very clear other than that it´d probably be a bumpy road and that it will take time. Of course, physical gold would work as perfect money so recall that the Global South has plenty of gold — and highly valuable silver — buried deep in the ground but still environmentally recoverable with adequate mining practices. This might turn out to be a game-changer both for these Global South regions of the world and for the Russian and Chinese investments to be made especially if the countries in question belong to BRICS and/or the BRI – Belt and Road Initiative. Ref #2 https://www.rt.com/business/558232-russia-switches-grain-exports-rubles/
the euro breakdown – up until July 21, 2022 – although eventually will get much worse
graph credit to “Goldmoney 2022”
“ The euro system has depended on redistributing wealth from Germany and the fiscally conservative northern states to bail out the profligate South using suppressed interest rates. That scheme is now kaput. The concept underlying the EU can be summed up as the socializing of the wealth of the northern states to subsidize the southern and less wealthy member nations. In keeping with its post-war low political profile, Germany went along with the European project’s evolution from being a trading bloc into a currency union.” – Alasdair Macleod – “Goldmoney” – July 2022
Ref # 3 https://www.goldmoney.com/research/the-collapsing-euro-and-its-implications
And sorry to say but it´s even far worse as the EU decided to establish a common currency without first having a solid fiscal and banking union amongst its members to regulate the financial framework and its economic underpinnings. Rather, the EU skipped all of that (“what for ?”) and went directly into a common euro currency as if such strict, unified fiscal and banking policies already existed (not). Furthermore, complicating the problem, the Maastricht Treaty requirements were not complied with, even receiving cheating help from Goldman Sachs in some cases. Let alone that a political union was also required, but let´s leave that for another day as the design was bad enough already.
So Europeans readily jumped from their trading bloc – actually a Customs Union with a Common External Tariff for foreign imports protection – directly into a monetary union with pretty much effective fiscal liberty for all of the many individual member states to spend as they best-consider fit on their own. Exaggerating, it´d be the equivalent of having some very hungry foxes as Guardians-In-Charge of a densely populated hen-house. True enough, the EU also evolved some Single Market features with the arch-famous 4 internal freedoms for goods, services, capital, and people… with the supposed “convergence” and “coordination of policies” etc… but there is no need to complicate the analysis with non-essentials. And the essence was and still is that if Germany sneezes, Europe catches the flu. And in the event that Germany went bad (as is now the case), Europe as a whole would end up terribly worse and the Club Med countries would no longer have an economy, period. And “Club Med” is just a friendly term used instead of the ugly-sounding PIIGS — meaning Portugal + Italy + Ireland with un-resolved Brexit + Greece + Spain… with France staringly absent (why so ?). And because of the EU “Russian sanctions” blowback now Germany is very very very sick – possibly terminally sick — and so the evolution of this horrifying built-in systemic risk is left only to your imagination.
Ref #4 https://www.goldmoney.com/research/goldmoney-insights/the-destruction-of-the-euro?gmrefcode=gata
Ref #5 https://reaction.life/why-is-the-euro-and-the-eu-allowed-to-cost-almost-anything/
Ref #6 https://www.goldmoney.com/research/goldmoney-insights/anatomy-of-a-fiat-currency-collapse
Ref #7 https://www.politico.eu/article/brussels-keeps-debt-rules-lifted-but-recommends-fiscal-prudence/
plan B re EU gold
So now the new name of the game is also having Rubles and Renminbi… which nobody has, at least in amounts anywhere close to what is needed… and only to be acquired through trade with Russia or China. Or having gold, not “paper gold” per ETFs, etc. but tangible, physical gold. Like when introducing Mr. Bond, James Bond. So where exactly is Europe´s physical gold stored at? The answer is nowhere that Europe can reach, have, or use. Why not? Because it has been (a) possibly sold off and thus is non-existent and now held in private vaults or exhibited in Indian women´s necks or (b) because whatever is left will not be returned with blah blah excuses of which together we can think half a dozen in a matter of a few minutes. And then WHERE is Europe´s gold totally or partially “supposedly” vaulted at anyway? Between the US per Fort Knox et al and the UK per the Bank of England and Threadneedle Street or thereabouts, both together “supposedly” vault lots of what was Europe´s gold or what´s left of it. Of course, just to play along with their own convenience and to increase their leverage Anglo Saxons on both sides of the Atlantic will insist that most of Europe´s gold (and not just part – or none — of it) is in their physical possession…but not to be given back because of blah blah and also plan “B” remember? Now “YOU” lost and “WE” Anglo-Saxons have the gold / your gold / our gold / whatever gold. So please let´s not argue about silly details such as ´ownership´ because we have got the gold´s physical ´possession´ whether real or simulated (but still believed…) and repeated in every single ´official´ source on planet Earth. So the fact of the matter remains that WE have it – or at least we can say that WE have it — and you can´t do a bloody thing about it. Simple see? Anglo-Saxons are a dangerous bunch but not dumb you know. Plan B means Europe is vassalized completely and effectively — without military or weapons – so would just follow orders without even dreaming any ideas of its own. Rule Britannia lyrics come to mind “…Britons shall never never never be slaves…”. Continental Europeans of course will be, but not Perfidious Albion. No Sir, because British Royal spirits – despite their 20th. century German origins per House of Saxe-Coburg and Gothä — would never allow it
why gold ?
Skeptics always ask, why gold? You can´t buy groceries with gold, can you? Okay, let´s postpone those very easy questions and submit to you right now the hard part (please see below) that I´ll also help out with and fully answer later. For the time being the idea is to convince yourself with your own line of thought and arguments of why J.P. Morgan famously told the US Senate that “money is gold and nothing else”. So quickie homework for you :
- make a full listing as complete as possible with all of the monetary virtues and advantages that gold has all put together on itself and which nothing else has. Google it, Tweet it, Whatsapp it, Yahoo it, Instagram it, Tic-Toc it, do whatever you want, ask whomever, take lots of time, copy-cat, and “cheat” a bit if you wish to…
- You will most probably still have missed the two most important ones which are almost never mentioned and should not ever be forgotten. Stay tuned…
“The Mother of European conflicts: If history is any guide, hostilities will explode the instant the EU member states individually or collectively rightfully demand a yet-non-existent fully independent world-class functionally detailed audit of the EU gold supposedly still in ´custody´ at the Bank of England or Fort Knox. This should take plenty of time and is the perfect excuse for delaying the whole process always under the exclusive purview of London and Washington, not Brussels. Or unmanageable problems would arise as soon as EU nations require immediate repatriation of at least some of such ´theoretical´ bullion, most probably all of them at the same time in view of circumstances.” Jorge Vilches
Ref #8 https://thesaker.is/natos-internal-gold-war/
In synchronized lockstep with the well-known ´Anglo-Saxon exceptionalism´, the London and New York gold and silver markets have always been beyond “opaque” without any significant reporting of transactions or positions. No data has ever been offered either on commercial banks holding accounts in the UK or the US, or precise technical identification of gold custodies, let alone those belonging to EU members. So who may or may not be acknowledged as a valid claimee of anything vaulted is an open subject left to the entire discretion of London and Washington, not Brussels. The same goes for the enormous unallocated gold and silver liabilities of the so-called ´bullion banks´… or any other pertinent data. Of course, the gold bar serial numbers records affecting original transactions, deliveries, quality, ownership, and technical status regarding grade, etc. are also missing.
Ref #9 http://plata.com.mx/enUS/More/403?idioma=2
Ref #10 https://www.bullionstar.com/blogs/ronan-manly/european-central-bank-gold-reserves-held-across-5-locations-no-physical-audits-will-not-disclose-gold-bar-list/ Ref #11 https://www.gata.org/node/13310 Ref #12 https://www.gata.org/node/20642 Ref #13 https://www.gata.org/node/21861
Ref #14 https://www.bullionstar.com/blogs/koos-jansen/guest-post-47-years-after-1968-bundesbank-still-fails-to-deliver-a-gold-bar-number-list/
So while Europe already foresees freezing and starving in the near term, the many pending questions include:
(a) do the US and the UK still have all of Europe´s gold bullion… or has it been sold off partly or totally or even loaned out as many experts insist?
(b) are the US and the UK willing and able to immediately return to European countries the physical gold they may still have left to legitimate owners if any?
(c) who are the legitimate owners of such-vaulted gold after decades of European reshuffling of political borders?
(d) would the European ECJ decide on gold ownership or the British or US Judiciary? On what basis, exactly?
(e) could the ECB, the IMF, and the BIS claim that Europe´s gold is, at least in part, “their” gold? why so?
(f) has any of Europe´s gold been lent, swapped, re-hypothecated, leased, leveraged or encumbered now lien with other many alleged legitimate claimees also standing in line with ´fractional un-allocated synthetic´ bullion custodies per “Digital Derivative Pricing Schemes“.
Ref #15 https://www.bullionstar.com/blogs/ronan-manly/central-bank-gold-at-the-bank-of-england/ Ref #16 https://www.gata.org/node/4279
Ref #17 https://www.bullionstar.com/blogs/ronan-manly/us-gold-reserves-immense-interest-russia-china/
“ The powerful forces of bank credit contraction are at the heart of a rapidly evolving financial crisis in global derivatives, whose gross value is over USD $ 600 trillion, an unimaginable sum. Central banks are on course to destroy their currencies through unlimited monetary expansion, lethal for bullion banks with fractionally reserved unallocated gold accounts while being dramatically short of Comex futures…Precious metal derivatives are an observable part of a wider derivative catastrophe that is caught between contracting bank credit and infinite monetary inflation.” Alasdair Macleod – “Goldmoney” Ref #18 https://www.goldmoney.com/research/the-looming-derivative-crisis?gmrefcode=gata
British economist Peter Warburton was 100% correct when he described that Western central banks were using derivatives in the futures options market to control gold and silver prices and protect government currencies against the public’s recognition of currency devaluation. Warburton’s essay was “The Debasement of World Currency: It Is Inflation But Not as We Know It”. Ref #19 https://www.gata.org/node/8303 Ref #20 https://www.usdebtclock.org/gold-precious-metals.html
Ref#21 https://www.usdebtclock.org Ref #22 https://www.bullionstar.com/blogs/ronan-manly/london-gold-vaults-bait-and-switch-lbma-prepares-bigger-changes/
In closing, please allow me to quote Mayer Amschel Rothschild “ Let me issue and control a nation’s money and I care not who writes its laws ”… which most probably inspired the creation of the US Federal Reserve Bank which is neither ´Federal´ nor has any ´reserves´ just electronic bits and bytes on a computer screen. But it still does own the (1) world´s reserve currency which dominates world business and (2) the US government and military to impose its will upon world business.
ADDITIONAL important REFERENCES:
It is said that after the French went through this, the French did not use the word Bank for a hundred years.
Rod, thanks for the comment.
You are probably referring to John Laws´ Banque Royale (correct ?)
I´ve read lots about it, but had never heard of the term “Bank” never been used again for a whole century ! Thanks again !!
hey is there even point to living ? i dont see a future at all. ive always wanted to be a blue collar dad but it seems even something that simple will be impossible. i live in canada. thanks for your wonderful blogging
dman, I read you and understand but still cheer up man the whole world badly needs blue collar dads such as yourself. Don´t let anyone or any news lie to you to change that perspective. God bless you and your child / children !!
thanks for the reply. i dont have children im only 23 but how in the hell should i think, everything is nuts
its the best for you that it will happen now. Other people are 10 or less years before pension. Whats about that? I transfered the most of my money to Russia. It is possible. At first open an account. Every from abroad can do that. Please do that in Moskow at Sberbank. Local bank employees are sometimes not able to do this because they don’t have the knowledge. They then say it can’t be done. Go to the boss or go straight to the big cities.
That is the one problem with Russians… They aren’t customer service oriented. “I don’t know how to service your request” is pronounced “It’s impossible.”
Other than that, Russians are great people.
How? Do you have to ring the Moscow Sberbank Bank from your home country? Do they speak English? Is their an application form on the internet? How do you transfer the money across. My country -Australia- told me they couldn’t do it when I asked in March2022. Has the West stopped sanctioning Sberbank? When? I suspect the Aussie banking Establishment won’t help me ,even if it is no longer illegal to deal with Russian banks. Likely out of greed and to be more Catholic than the Pope ie Aus gov.
It would be good if you or someone also knowledgeable provide us with some practical information.
Depends how much Au and Ag you stacked, eh?
” the  increase of non “money”  was literally wreckless”
Could not be broken? I doubt it. Perhaps “reckless”, but it’s hard to get a mental image of this. Who is the actor here?
Tony Kaku, your are correct. As you suggest, the term used should have been “reckless” defined as ´marked by lack of proper caution, careless of consequences, irresponsible´. Cordially Jorge
The US dollar and the Euro are not fiat currencies created by edict of any government, they are created as interest bearing debt out of thin air by banks every time they make a loan to either individuals, corporations or the US Treasury.
It is high time that the right of money creation be returned to sovereign governments without incurring debt.
“The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.”
And then he was assassinated.
Kaprikorb4, yes, you are correct in saying that ´government edicts´ do not create dollars or euros. True enough, it is actually banks that “create” both out of thin air.
But such banks are authorized to do so through “fiat” government-imposed mandates / regulations / laws as governments have not retained the capacity to issue currency on their own. Still, be it as it may — and even if government actually were to issue such legal tender currencies instead of banks — today they´d have no intrinsic value whatsoever.
Tell that to the Chinese.
Their government owned central bank creates their domestic currency the yuan free of bank debt to fund government spending directly into their economy without taxation.
If the right of money creation in the US were returned to the US Treasury, it would be a simple matter to control the rate of inflation of the currency to have a suitable fraction deleted back out of existence as necessary.
This is exactly what private banks do as the principal of their loans is repaid.
Be that as it may, the enormous difference I see is that behind its yuan China has an enormous back-stop to it including up and running production capacity and capabilities for anything and everything we can think of including ultra hi-tech stuff no one else has, leta lone the US. Besides, China has at least 35,000 tons of physical gold bullion. The US has neither of those, but true enough it does have — so far and maybe not for long — an enormous military force distributed in 790 international bases. Furthermore, in passing, I do not agree that “controlling the rate of inflation of the currency would be a simple matter”. Private or government owned, the US has no underlying value behind its massive debt and humongous currency in circulation.
Hi Jorge; could I test your thinking with another example of a sovereign state, but at the other end of the spectrum – New Zealand. Let’s say the NZ govt changed the law to allow it to create money exactly as Kapricorn4 outlines China does above.
NZ is a disproportionately significant player in the global food industry (primarily dairy). Would this not be sufficient (particularly in current circumstance with reliable food sources declining) to back its currency? I see no reason why any country which has its own currency could not simply do as China does, as long as that currency is backed by something of global value – changes to the laws relating to currency creation notwithstanding. This would also – as I understand it – remove the requirement for gold reserves, as per the BRICS commodity-backed currency which also would not need gold…
Am I missing something?
Mike, thanks for your time and valuable input. And please do keep them coming so I can stay on my intellectual tip-toes ! Your questions and challenges allow us to think out loud together much better than individually isolated facing a blank screen.
Mike, your questions have been studied and debated at different depths sooner or later by human beings since time immemorial, sideways, from right to left, from left to right, crossways, bottom up, top down etc etc etc you get the idea. The short and ´perfect´ back-stop for currency is “precious metals” — gold and silver — with necessarily not full backing of every single circulating note (or bill) but at least say, a 20% to 30% coverage in case lots were to be redeemed… actually for a short while and then turned back to currency again for spending purposes. So much so that for centuries this was not even debated and thus gold came to be the money of kings, silver was the money of gentlemen / noblemen… and copper — yes, Dr. Copper — the money of the masses or poor people.
So that´s ´perfect´ money in absence of which we can start discussing forever. Not that many decades ago the French thought they had discovered the Holy Grail with land — physical acreage — to back their Assignats… and that idea failed miserably. Land surely can be productive for foodstuffs… but it can also get flooded, taken over, subject to agrarian reform, militarily compromised, dry season, tsunamis, hail, weather events, plagues, you name it…
So then we could also have commodities as possible backing, which would by no means be ´perfect´ in any way shape or form. Large enough and varied enough quantities of commodities — including strategic products — could possibly be just a (temporary ?) backing of currency as a substitute for precious metals as suggested in the article above, namely Rubles and Renminbi.
So finally we come to NZ and its dairy industry…which I´d say is definetly not enough because NZ — just like the case of say Uruguay or other small countries — would offer a very limited quantity and range of commodities needed by the world market. Argentina or Canada or Australia for that matter would offer more quantity and type of commodities, but still not enough to convince.
So we come to Russia, the largest country of planet Earth with 11 time zones with many important high-tech industries and state-of-the-art technologies already developed plus every single type of commodity both in type and quantities large enough to affect the world markets all by themselves, including energy per oil & gas & coal & nuclear & solar. China also has its very modern up and running production capacity and capabilities for anything and everything we can think of and even are very much used to consume today. So between Rubles and Renminbi we can get just about anything — current or future — which human beings may need. Now that´s a good substitute for precious metals backing of currency, no ? What you think ? Cordially, Jorge
It is hardly surprising that China has a large tonnage of refined gold in storage, since it is the largest gold producer in the world at 332 tons per year. Russia is the second largest at 331 tons. Both countries have no real need to sell gold as it is still regarded as a hedge against inflation of national currencies, even though the price has decreased from $2,060 per troy ounce in March 2022 to $1,709 in July 2022.
All wealth is created by the workforce, the banks are merely parasites, who prey upon the workforce by saddling them with debt using money created ex nihilo.
“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)
“I believe that banking institutions are more dangerous to our liberties than standing armies.”
“ The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating.” -Thomas Jefferson
The interest payable on the US Treasury debt of $39 trillion is now approximately $500 billion per year, that also has to be created as interest bearing debt ex nihilo. Soon the debt will be larger than the US military budget.
China has no external debt. It is now the world’s largest creditor nation and the US the largest debtor.
The globalist banks are intent on getting their vampire squid blood sucking beaks into the Chinese economy, but the Chinese have no intention of letting this happen, even although China is now ringed with US missile bases.
Kapricorn4, so basically you agree with the title of the article in that ” Western currencies will fail “, correct ? And you say that ” all wealth is created by the workforce ” but I´d add if and when acknowledged by the markets. For example, a cow is wealth, but not a ditch if immediately refilled after caving it, meaning no change despite the effort both ways. Cordially Jorge
I do not agree that Western currencies will fail as such, but they will continue to decline in purchasing power as time goes by. Federal Reserve notes have lost 98% of their purchasing power since1913, it is nothing new.
Everything that is made by industry needs maintenance by the workforce, but will eventually have to be scrapped, but the metals can be recycled. Even if you buy real estate, it has to be maintained due to the ravages of entropy and the payment of property taxes.
The problem for the US is that its economy has been de-industrialized to a large extent, so that imports from low wage and more efficient means of manufacturing, have displaced the American workforce into low wage menial jobs such as data entry clerks or debt collectors. No real tangible wealth is being domestically created anymore, and the financial capitalists have taken over to boost the price of already existing assets, that wage earners are finding increasingly difficult to afford, particularly since state functions such as education and healthcare have been privatized to extract profit at every opportunity. The US economy is in terminal decline and that of authoritarian socialist economies like that of China are in the ascendant.
Kaprikorn4, thank for your valuable input.
I´d think that by saying that Western currencies ” will continue to decline in purchasing power as time goes by ” your admitting their failure no ? You also say ” Federal Reserve notes have lost 98% of their purchasing power since1913, it is nothing new.” Question: in relation to what has the US dollar lost 98% of purchasing power ? Gold by any chance ? Would it not be safe to say then that the US dollar has already failed then ? How much purchasing power percentage loss would we all need to witness then in the US dollar before hitting hyperinflation? 99% ? 99.5% ? 99.99% ?
Kaprikorn4, you seem to support the US dollar demise already by saying … ” No real tangible wealth is being domestically created anymore, and the financial capitalists have taken over to boost the price of already existing assets, that wage earners are finding increasingly difficult to afford ” . That´s the whole idea of my article.
I am actually appalled and dismayed by the maliciously deliberate decline of the US economy.
America could be a paradise on earth, if it were governed for the benefit of the many, instead of the few,
“Be that as it may, the enormous difference I see is that behind its yuan China has an enormous back-stop to it including up and running production capacity and capabilities for anything and everything we can think of”
This was the theory or the fact behind the DM at the time. The DM was created originally by a government edict and derived its value through the strength being backed by German industrial production.
Through the efforts of real politicians with a view into the future, Germany signed the deal for the Russian gas supply, and guaranteed pricing through long-term contracts. That was the basis of German production, and competitiveness, which is thrown away now by again following the dictate by the USA.
The first spanner in the works was to scuttle the deal in the 1960′ to trade pipeline pipes (of a size not produced in Russia at the time) for gas, which was delayed by several years through US influence, until Willy Brandt stopped that nonsense and went ahead despite US interference.
So, the US interference in German-Russian trade relations goes back 1/2 a century.
Peter M, thanks for your pertinent comments.
You correctly say ” The DM was created originally by a government edict and derived its value through the strength being backed by German industrial production ” Well, with a different genesis altogether, the US dollar originally gained its world reserve currency status by having won WW2 without being territorially altered or having its production base destroyed, which is equivalent to your argumented point. So per the Bretton Woods the ´dollar-exchange´ standard had the US dollar was accepted as the pivot point for all currencies while also (a) having LOTS of real physical bullion vaulted at Fort Knox et al (b) allowing international free-exchange of such at $35 per ounce (c) derived its effective value through the strength of being backed by US production of anything and everything worth having, remember ? But since the 1970s and beyond the “Made In USA” brand cannot be found anywhere with others (mainly China and Germany and Japan) taking its place. Cordially Jorge
as per https://money.visualcapitalist.com/infographic-the-properties-of-money/,
‘money’ needs to have several properties,
Divisible: Can be divided into smaller units of value.Fungible: One unit is viewed as interchangeable with another.Portable: Individuals can carry money with them and transfer it to others.Durable: An item must be able to withstand being used repeatedly.Acceptable: Everyone must be able to use the money for transactions.Uniform: All versions of the same denomination must have the same purchasing power.Limited in Supply: The supply of money in circulation ensures values remain relatively constant.
And must support 3 main functions: medium of exchange, unit of account, and store of value.
but all in all, money is just a narrative. its only worth as long as a supporting society enables it.
money magick has been used for the past centuries to confuse the plebes, and free ride empowerment of the olygarch castes that dominate it for long.
but in the end is very simple. other than the store of value, which is always debatable, the other 2 are easy to achieve and all mere fictional narratives which should have 0 cost to mantain in a working society.
and its proven through history that the problem is manageable and solvable, even in ancient societies lacking all the technological progress we now possess.
the last roman emperor before the east west split, and his measures to handle the economic caos he inherited from his predecessors comes to mind…
in any case, it will only be possible after we stop the current mammon cult. and common people need to realize that what unites us under the feet of capitalism, is a lot stronger than what artificially divides us to keep the system in place.
anodinous, saludos amigo !
And thank you so much for your excellent link to the required “Properties of Money”.
Actually there are even more properties that precious metals have — and nothing else has — yet not mentioned in the link. For example, there is far more to say regarding the store of value advantage that gold has… and nothing else. Accordingly, per point (2) I tried to tease readers about a never-ever mentioned and most important property of gold. I am referring to the fact that — please read slowly and carefully, I know why I say this — “the marginal value of every single additional unit saved is infinite and forever”. Now then, I have NOT just said that the value of gold is “infinite forever”, no, no way. I did NOT say that. I did say and now repeat that “the marginal value of every single additional unit saved is infinite and forever” which means that a given country can continue saving in gold for currency back-stop purposes without ever running the risk of becoming a dis-advantage by any means. The same cannot be said of any other gold substitute as the ” marginal value of each additional unit saved is NOT infinite and forever” as such can eventually turn to be obsolete or perishable or un-wanted, or whatever. Imagine what could possibly happen in say, 2050 — or beyond — if a given country had backstopped its currency with physical oil & gas… Gold has a 5000 year history firmly and deeply seated in the human memory and DNA: Cordially, Jorge
All sovereigns issue money as a claim on government resources, so all money is a credit instrument and a debt. Governments issue money to provision themselves, to buy the stuff they need or pay the people they want to pay, whether officials or old people or poor people. At the other end, all governments have the power to tax that money and discharge the debt. This is so whether paper, digital, or gold is concerned, and strange little El Salvador now allows for BitCoin to pay taxes.
MMT describes how this works very well.
Tedder, I follow you, but such policy has limitations and is perishable with definite shelf-life. You can´t permanently pay for tangibles, services, growth and value with debt, no way. It can be done for a given — perishable — period of time, not forever. That´s the whole point of the article. “All people can be fooled part of the time, or some people all of the time, but not all people all of the time” – Abraham Lincoln
The US government dies not issue money, it borrows money from private banks.
The US Treasury debt is now $39 trillion and rising, the greatest banking scam of all time.
Kapricorn4, good points. America and Americans need sovereign money,that is invested in the best interest of our nation and to build a great American sovereign nation. We Americans need to create INDIGENOUS CAPITAL, which drives nation’s cash flow, comparative advantage and overall well-being.
INDIGENOUS CAPITAL = Sovereign Money X USA’s Capabilities X USA’s Capacities
Every nation like China need to focus on its Indigenous Capital (IC). This term “IC” has been used by Private Financial Empire’s insider and they state, “xxx failed to develop indigenous capital.”
Our congress has been bribed thrice to debt enslave Americans through privately structured central banks. Just learn how the Federal Reserve Act was passed in 1913. Even now these battles are happening in the context of digital dollar where the crypto sector is opposing CBDC and along with the banking sector pushing for private money creation. Please read the various fillings with the House Finance Committee of 2021/22. The U$A is a best democracy that the money can buy. An unjust law is no law at all. It is time our nation become sovereign. There is no sovereignty without monetary sovereignty.
per BBC – ” Consumer prices in the EU rose at a record 8.6% in May as food, fuel and energy costs soared. That is well above the ECB´s 2% target. The Ukraine war + Covid + supply chain issues have driven up everyday costs”…
Much higher inflation is coming though because energy costs have not yet fully kicked-in but will eventually due to the EU´s “Russian sanctions” which end-up affecting the price of everything in Europe, not in Russia. With the current EU strategy the euro is doomed.
ECB president Christine Lagarde said: “Economic activity [in the eurozone] is slowing. Russia’s unjustified aggression towards Ukraine is an ongoing drag on growth.”
Imagine if Russian oil & gas were reduced to, say, 30% or… completely shut-off…
I can follow the reasoning, and agree with the substance, but since when has logic won the day in the last few years? Yes, the world will split/decouple, a US currency bloc and the rest. Those in the US bloc will HAVE to use the USD, or else, whether they believe in it or not. This creates demand for USD, so USD will maintain a value. In short, the USD will have value as long as people continue to accept it IMO. The Euro, and other currencies, can disappear, makes no difference, we are all despoiled vassals by now anyway. The rub will be in the ‘trade’ between the two blocs – reserved for elites only and conducted in gold or barter, for essentials. Then, we must factor in the economic and trade effect of much higher mortality and low birthrates for the foreseeable future. Can’t ignore the other elephant…
Grant Piper, many many thanks as your points are very well taken and you may actually turn out to be 101% right in many things !! And for sure that US dollars would still constitute legal tender for all transactions in such US dollar “zone”. And if people and governments therein accept the US dollar as legal tender it would retain value — just as you say –… but only as unit of account and means of exchange. But the problem would remain if people and corporations would still decide to SAVE in US dollars (or not) which is the third elephant in the room (wink-wink) Because all the money printing cannot go on forever unless investors — whichever wherever, local or foreign — do not decide to park their savings at such debt instruments which are now highly suspicious to everyone involved.
Cordially Jorge… and please your comments coming !
American citizens living in the US will still use the dollar as a medium of exchange. What about those 750 military bases in 80 countries. Would these at last be closed because nobody would invest in the dollar? That is a lot of people who would be returning to the US. Since the birthrate is below replacement level (1.6 children per woman of child bearing age) that would help. I prefer that to open borders system currently in place.
Theodora, you have answered your own KEY question as per Prof. Michael Hudson the US´s 790 military bases constitute the meat of the US deficit spending.
You say : “American citizens living in the US will still use the dollar as a medium of exchange” . Well, actually it´d be even more than that as — within US territory — even non-citizens (or tourists for that matter) will still use the US dollar not only as a medium of exchange but also as unit of account and legal tender for settlement of transactions.
Now the problem starts when very few would SAVE very little in US dollars and then without any store of value the US dollar would cease to be the world´s reserve currency.
And “what about those 750 military bases in 80 countries” you ask ?
Nothing, simply shut down because only with US dollars to pay for stuff OUTSIDE the US territory US dollars would not be seeked, thank you but no thank you.
Riddle me this:
So who owns the gold?
Well like anything possession is 90% of the law, the other 10% is discovery.
So you have possession of the gold, but where did it come from?
Well that’s how the 10% gained possession of all the gold.
So that’s who owns the gold, the paper, the history and anything else the 10% can come up with.
Alabama, what you are asking could be defined as the “end of history” conundrum
Except we have yet to find out just whos history is ending.
If there is a queen in search of a king, the west is doomed, but if there is a king in search of a queen, the rest are doomed.
And yes, another riddle.
> So who owns the gold?
that’s why in countries like India, anything extracted from below 3ft is owned by the govt (aka the people)
then it can be sold and the chain is clear, unlike the USA
You got to love a law that’s hard to enforce.
Just to show what we are talking about ;-). https://www.youtube.com/watch?v=_i2LeYNE9cU
A million strong army of useless eaters depend on the status quo Jorge.
Those Pimps & Presstitutes will never make it in the real world.
I’m thinking Clive of India-esque and the aftermath for those who served the Empire. lol
Prezado Jorge, sou brasileiro e como você citou os BRICS, pergunto:
Você tem uma opinião sobre o papel que o Brasil poderá representar nesse novo formato de mundo que está se formando?
Pode o Brasil ter um papel importante nesse cenário?
Dear Jorge, I am Brazilian and as you mentioned the BRICS, I ask:
Do you have an opinion about the role that Brazil could play in this new world format that is being formed?
Can Brazil play an important role in this scenario?
Prezado Marcelo, Brazil poderá representar um papel tremendamente importante sul BRICS. Hoje Brazil teim treis o cuatro coisas extraordinarias no su favor: tamaño grandissimo da tudo incluiendo poblacao + localizacao geografica exclusiva no continente americano tambeim no mondo entero + relativa muito boa stabilidade politica mais tambeim clase meia beim establecida + variedade enorme da recursos naturais da tudo tipo No Brazil ficam enormes variedades da ´commodities´ agricolas, mineiras, petroleo da reservorios tradicionais sim “fracking” (!!!) etc etc etc etc. O seja, Brazil e um pivote strategico importantissimo pra ou BRICS+.
Dear Marcelo, Brazil could play a tremendously important role within BRICS. Today Brazil has in its favor 4 extraordinary aspects such as: enormous size of everything and anything Brazilian including its population + exclusive geographical location in the Americas and the whole world + relative political stability and well-established middle classes + extraordinary variety of natural resources, agricultural and mining commodities plus traditional oil & gas reservoirs that do not need fracking (!!!) etc. etc. etc. etc. That means that Brazil now is a truly important strategic pivot point for the BRICS+ Cordially Jorge
Uau. Muito obrigado Jorge por sua imensa disposição em responder, não só ao meu, mas a praticamente todos os comentários. Eu me pergunto como você consegue fazer isso??
Muita alegria de minha parte em receber sua resposta.
Wow. Thank you very much Jorge for your immense willingness to respond, not only to mine, but to practically all the comments. I wonder how you manage to do this??
I am very happy to receive your reply.
Well, Marcelo, let me put it this way if I may
(a) Right or wrong — or somewhat right & somewhat wrong — I still believe I have something valid to say
(b) I care to make a difference, so I try as hard as I possibly can
(c) You and others get involved and participate helping out the collective “The Saker” so to speak, including myself, making me think more, which helps lots. If I can´t answer your simple — yet valid — questions I better get back to the drawing board.
(d) Mine is a very lonely task, but thank God with your intervention you make this Comments Sections feel as my second home to me
So your critical judgement is most welcome Marcelo, please keep it coming ! Cordially Jorge
Marcelo, por favor permite-me vocé responder da siguiente maneira com meu humilde Portuñol
(a) correto ou errado – ou parcialmente correto o parcialmente errado — eu pensar que eu tengho coisas validas per dizer a tuda gente bonita da “The Saker” meus certos amigos
(b) Eu quiser fazer au diferencia eu por isso meu intento teim que ser ou mais forte possivel
(c) Sua participacao Marcelo fica muito beneficiosa pra tuda audiencia di “The Saker” e tambeim para mim pra fazer pensar muito mais forte e pra risponder as preguntas da tudos voces caso contrario significa mesmo que eu dever pensar muito mais forte ainda.
(d) Eu fico muito solzinho mais aqui no “Comments Section” eu siento-me no mia propia casa !
The financial mafia prints money to cover the cost of the increase in real estate prices, but that money will remain as a benefit at the higher level, the population will only have to pay more for the same.
The intrinsic value of money is like beauty, and beauty lies in the eye of the beholder.
Another definition of money is as an abstraction of power. As Mao said : ‘all power comes from the barrel of a gun’. The dollar is in reality backed by the biggest gun, nuclear bombs. The rouble is recently backed by comodities and the quickest gun (hypersonics) …
The poor are broke, and therefore powerless … or visa versa. The rich have plenty, and therefore powerful … or v.v.
Money needs to be a) fungible, b) durable, c) divisible and lastly but most importantly d) a store of value.
It has nothing to do with beauty.
The Russian Rouble soars against the euro. Take a look at
Fiat currency is magic. All magic is a trick.
You have to believe it, to enjoy it. Until the show is over.
Only gold is real money, as Mr and Mrs History.
Another excellent read also a scary read. The truth can be beautiful until it’s ugly. Keep the articles coming. I like to read the good stuff at breakfast and re read after lunch.
With regards UK gold there is an article in Sputnik today from the UK’s top spy. An smart looking 007 type; grey hair with the top dyed golden or it could be just blonde, maybe it’s the light reflecting off the narrative. This could be the were the missing London gold has actually gone?
We live in hysterical times forsure.
Aaron thanks for your valuable input and if you could possibly share a link with us per Sputnik´s interview to the UK´s top spy it´d be great guy ! Cordially Jorge
“Top spy” my Aunt Fanny! This aint Roger Moore. Each of his opinions is a stupid. Here’s the link anyway:
Yes, of course, GOLD has always been the ultimate store of real value in turbulent times. But, only when you have it in your own physical possession (not in some bank or other institution from which it can so easily be confiscated at the whim of whatever “authority”).
Here in Brasil, many Americans have invested in agricultural / pecuarial enterprises as hedges against the collapse of the US printing-press dollar. The big problem now is that the new socialist governament seems likely to confiscate most or all of their holdings. Land and “improvements” are impossible to shield from the confiscators (just ask any of the refugee farmers from Rhodesia / Zimbabwe). Gold, on the other hand, is relatively easy to hide and to protect.
In Gold We Trust!
> just ask any of the refugee farmers from Rhodesia / Zimbabwe
if they paid fair price for the land there’s nothing to worry
I’m no gold bug, Jorge, but you make a convincing argument. If for no other reason that everyone needs something that’s agreed upon as a common value. It doesn’t really matter what it is and gold has quite a track record of longevity. What’s interesting is the whole “western world” and its imperialism started with the Portuguese going to get the gold they knew was in west Africa. They didn’t have enough valuable things (to the kingdom of Mali) to trade for that gold and between the diseases, climate and unimpressed natives couldn’t take it by force. Enter the slave trade from Kongo to Mali in exchange for gold. And we’re off to the races that are ending now.
I’ll only quibble with the position of the north to the south in Europe. I see it as semi-colonization by Germany rather than largesse. I assume most Greeks agree with me. The Germans learned a lot from their occupiers and combined it with semi-mercantilist manufacturing for export. Healthy economies to the south weren’t necessarily helpful for the neo-liberal, neo-mercantilism the Germans were managing on the back of cheap energy.
Lex, as always, your analysis is certainly worth reading slowly and carefully. Lots of food for good critical thought there. Please keep it coming. Cordially Jorge
PS: above please refer to my reply to Theodora´s post I think you can surely add to it.
Another excellent article on Thesaker. Discovered at https://overton-magazin.de/krass-konkret/brics-koennte-sich-als-alternative-zur-us-gefuehrten-internationalen-ordnung-entwckeln/
And unfortunately, it is much worse than that, because the EU decided to introduce a common currency without first establishing a sound fiscal and banking union among its members to regulate the financial framework and economic fundamentals. Instead, the EU skipped all that (“what for?”) and went straight to a common euro currency, as if such a strict, single fiscal and banking policy already existed (which it did not). To make matters worse, the Maastricht Treaty requirements were not respected, in some cases even with the fraudulent help of Goldman Sachs. Not to mention that political union was also required, but let’s leave that for another day, because the construction was bad enough.
Also correct as far as it goes. But Germany is not only a victim, Germany is also a big culprit (Prof. Flassbeck keeps pointing this out). With the Hartz4 legislation and the resulting low-wage policy (BK Schröder), production costs in the FRG were depressed in relation to other countries. The wage policy no longer worked to increase productivity and thus made German products uncompetitive in the EU and competitive on the world market. And on the world market there is another factor without which Germany’s export miracle would not work at all. Greece, Italy, Spain, Portugal, soon Croatia and to some extent France are depressing the value of the euro. If Germany had a DM economy, other countries would simply devalue their currency and German exports would no longer be competitive because they would be too expensive. It is a misconception (a fairy tale for the people) that only because of the unique quality all the world wants to buy GERMAN GOODS no matter what it costs.
Germany itself does not respect the Maasstricher agreements, because its trade surplus / export surplus has been far above the agreed 3% for many years. Some years more than twice as much, namely 7%.
By the way, export surpluses are “debts” of others. If one makes “export surpluses” with the others every year, how and when do the others pay back their debts (according to Flassbeck).
A roughly balanced import/export balance is good for the country.
Greetings from East Germany
Do you have a source for the Mayer Amschel Rothschild quotation?
I have seen it bandied about fairly freely, and yet never with a citation, for example in Paul Grignon’s animated documentary Money as Debt from ca. 2006.
I looked for a source using my laymen’s skill set and the oldest I could find, back when the internet was less censored, was an occurence in a socialist worker’s newspaper in the U.S. midwest in the 1890’s; the implication I got was that it was manufactured for propaganda purposes by enemies of financial capitalism. It seems like a quotation so necessary that it would be invented if no such actual words had actually ever have been spoken.
Does anybody have further information on the provenance of this quotation? It seems to me bad scholarly form for this quotation to keep getting passed around without any confirmation of its authenticity. I am reluctantly leaning toward a conclusion that it is too good to be true.
aij, thanks for bringing this up. My short answer is no, I do not have any sourcing for such very famous quotation any better than yours aij. I also pretty much took it for granted but I´m not so sure now. Still, your research is the best out there ! Cordially Jorge
I found this about as loud a clarion call for fraud as any I’ve heard or read. I have to think many of these ultra-insiders are looking for a place to land after they get their face transplants…..
David, your link is the most compelling ultra-insider detailed description of the paper gold fraud details I have ever ran across. This is a very brief MUST READ. Skeptics please link.
Thanks for posting it David. Cordially Jorge
Righto, Jorge. By the way, spot on writing on the subject. Thank you.
Here’s another teaser-source link that provides further context/validation for the yet-dubious:
graph per the Office of the Comptroller of the Currency showing the 8-fold increase in the notional value of the Futures & Options Precious Metals Derivatives at commercial banks 2022. You can´t make this stuff up.
Three simple Laws for banking.
One. The creation of the monetary supply must be retained by sovereign nations, and offered as a profit-free service, to the national customers.
Two. Interest upon money is forbidden, for as Aristotle said, ‘money was made to be used in exchange, but not to increase in interest’!
Three. Customer collateral, must be monetised as interest-free customer assets, with the Titles of ownership, held in Trust, for the customers, during the loan periods.
Any country which follows these three simple laws, will have a healthy future (unless invaded by the debt bankers!)
I will be short.
They will not. The article is just wishful thinking. And not a very smart one.
Crash is in no interest of China & Co. The last thing they need is to give the US “inteligentsia” another reason to go balistic. Literally.
What will happen is their -real- value will self-adjust over time. Think a decade or so. The inflation already started the process. 5 years of 5-10% inflation and you are at 1/2 the value.
What will happen is the commodity prices – the backbone of international trade – will never again “go down” / as denominated in $/ but the rest of the World will get richer, so their *relative* value will still decrease.
That way the “West” will look to have not been affected, “just” that China will suddenly be found way richer. Gee. What a surprise.
One can think of it in terms of GDP to GDP PPP ratios. Today, the Chines GDP PPP is about 3x to 4x the nominal GDP. In 10 years the ratio will shift to 2X, possibly less.
Big ships take long to turn.
They also take long to sink from rust as it does not come suddenly. There is always time for repair and so they get repaired in time well before sinking. Their speed goes down while under repair and a bit even after. But they do not sink.
Harsh critic of the article, but your hypthesis is more than plausible. Analysts tend to get overenthusiastic in their estimations, no matter which side they support. Explosive crises only happen in extreme conditions, and the global south isn’t inclined to follow the same insane policies detrimental to themselves than the western world (wars and avalanche of sanctions). A slow decline is much more likely, although it’s almost inevitable there will be more and more civil uprisings as the insane globalists get and more desesperate to cling to power. So how painful will be the landing is more of a matter of how difficult it will be to expulse our corrupt elites to return to saner policies rather than coming from external factors.
user, you say ” Crash is in no interest of China & Co. “. Well, it may or may not be in its best interest, but still China cannot do a thing about what´s going to happen with Western currencies. They´ll just watch. Cordially Jorge
Northern Europe may still willing to be manipulated by the Anglo-Saxons for a few more years to come but the countries of southern Europe including Italy, Spain and Portugal, in my opinion won’t put up any longer with this scheme. The breaking point for the EU will start in the south as soon as the next winter is over, when they actually feel the effects of low temperature on human body. Today, Germans are taking 60 percent less shower than before the Russian Special Military Operation began. Less shower means more foul smells. In France they may have a historic solution for the problem by masking the smells using eau-de-toilette or perfumes, indefinitely. Not too sure what Germany could do. I read somewhere that L.V. Beethoven used to keep his own private portable basin next to his bed all the time and when it was full he just threw it out the window into street where hopefully a next rain could wash everything clean. Is Germany so nostalgic that wants to go back to that period? Madrid and Rome will be going on their own business and may even leave the EU by next year. Now that their tourism industry is in mess, they have very little fear of leaving the EU anyway. Their best course of action would first be getting out of the Russian Black List by establishing direct diplomatic-trade relations with Russia and the Eurasian union thereby welcome visitors from those regions and also import needed raw materials and energy directly from there, bypassing the Anglo-Saxons
re:GDP: dont forget most GDP, and in particular, EU countries, by mandate since a few years ago, have a free for all rubric for black market econony, where they put several percentage points artficially raising values.
Kind of the tricks they perform to say that the inflation was kept low for the past decades.
lies, damn lies, estatistics and economics.
To be sure then, as always, as reiterated by Jorge, you must emulate the central banks and sovereigns and own gold in your possession. Physical, take delivery, and have a boating accident later to cover the loss story to any inquisitive question. Capisce?
Thanks Jorge for confirmation and a great article.
Only 2% of Federal Reserve notes are printed on paper.
The other 98% is created out of thin air every time banks make loans to individuals, corporations and the US government. US Treasury debt is now $39 trillion, corporate debt is $11 trillion, US consumer debt is $16 trillion, US student loan debt $1.6 trillion, credit card debt $841 billion, house mortgage debt $17 trillion.
Inflation is a word used to describe the increased cost of living that is due to the increase in the money supply as debt, the increase of prices for goods caused by restriction of supply caused by US sanctions on importers.
Of course Biden, blames Russia and the greedy employees, who need more money to make ends meet.
The real unemployment rate is the US is fudged by the US Bureau of Labor Statistics by re-categorizing those whose benefits have run out as “not in the labor force” instead of “unemployed”
Unemployed 6.3 million
Not in Labor Force 98.8 million
Employed 158.6 million
Admittedly $ 69 million retirees, who are receiving Social Security benefits are not in the labor force, that leaves 29.8 million unaccounted for.
You must surely know http://www.usdebtclock.org. Therein the updated figures you mention are higher, in some cases much higher. Furthermore there are debts you do not mention and may eventually be the ones that trigger the debacle, such as:
* Social Security liability = $ 22 Trillion
* Medicare liability = $ 36 Trillion
* UN-funded liabilities = $ 170 Trillion
* Liability per US citizen = $ 512,000
* US debt held by foreign countries = $ 7.5 Trillion
* US total debt = $ 91.5 Trillion
* US total personal debt = $ 23.5 Trillion
I remember reading of how the Bretton Woods system had the US dollar linked to gold at a rate of US$35 per ounce. Now the price of that same ounce of gold is around US$$1,729 as of this writing
if this site is to be trusted.
35 ÷ 1729 is around 0.02.
Is this somehow related, come to think of it?
From the bottom of my heart and the top of my brain: CONGRATULATIONS Joey !!
I mean it very seriously, and below I´ll try to explain why… despite some minor “errors” (sorta, not really)
So I hereby formally and publically congratulate you Joey because of 2 main reasons
(1) you don´t seem to be an “expert” (nor pretend to be one…) and your almost 100% correct results even surprise yourself no ? Wonderfull. So while you are no expert what you correctly approach and calculate Joey has been and still is very well-known by “experts” — who BTW do not mention it that often — but you still reached the same conclusion without any “expert” help from them…
(2) you are 100% on the right track, you have good / excellent instincts Joey, always trust them !
And, just in case, CONGRATULATIONS yet again Joey
Now then, why do I say there might be something not quite 100% ´correct´ ?
Your reasoning is perfect and you measure devaluation in relation to the only real money ever, namely gold.
And you mention Bretton Woods 75 years ago and so, yes, true enough in a 75 year time span your calculation is “correct”. But what if you made the same calculation as from 1913 when the US Federal Reserve Bank was created and gold was worth USSD $ 20.67 ? The same equation and corresponding calculation would result in 0.012 and not 0.02 which is much worse meaning the US dollar only kept 1.2% of its value re gold.
Now, you are correctly also citing your source and assuming that $ 1729 is today the real effective price for an ounce of physical gold bullion. Well, hundreds of experts do not agree with that per the more than 40 references cited in my article above plus many other right here in this Comments Section right now as we speak plus another one of mine linked below. So some experts say that an ounce of gold could be higher, others much higher, and yet many other really true experts with very precise comparison ratios between monetary base / dollars printed / dollars in foreign hands… and effectively above ground available gold … they say that an ounce could currently be worth USD $ 75,000 or above… which would mean that the US dollar effective devaluation would be monstruous almost worth-less.
Wow is this a world of deception!
I don’t know that fiat is such an illogical idea for currency.
I do know that all this talk of money printing is rubbish, a dangerous deception in fact.
When the Fed does Quantitative Easing it takes bonds out of the market through the banks and replaces them with so called “bank reserves”.
These bank reserves are not money whereas the bonds are money so QE=QT and conversely QT=QE as right now they are swapping their bonds back for their “bank reserves” and so reliquifying the market.
The US dollar is rising strongly right now and bond interest rates are actually falling. This is because there are not enough dollars out there as opposed to too many as Alisdair McCleod would have us believe.
The banks know there is going to be a liquidity crisis and they are setting up the Fed to take the fall by admitting eventually to a mistake. That is to say, the coming liquidity crunch will be dressed up as a recession caused by the Fed in order to maintain the deception.
This is to disguise the fact that the banks are omnipotent in the financial world and pretty much in control of politics too…….”All wars are bankers wars”.
Understanding money and its origin is so important as the misunderstandings multiply every time a respected voice spreads his ignorance, for want of a better word.
Money is created as debt in the private banking system.
Governments and reserve banks have nothing to do with it.
As money is created by private banks, risk is created for both borrower and lender on its creation.
I don’t think its value is diminished when this happens
The real problem we have is that those who create the money also decide who gets to borrow it.
And investments options have been narrowing for decades, leading to a lack of creation of money ie there are not enough dollars out there to pay the interest on existing debt, meaning the Ponzi scheme is failing. Look at the rising $US value and falling treasury yields as proof.
I believe this whole Ukraine war was provoked to achieve more public spending and so bigger fiscal deficits and to excuse the CPI inflation and price gouging which was about to take place.
The system is exposed and vulnerable.
Little Black Duck,
I find your closing statement very valid indeed re ” The system is exposed and vulnerable “.
I´d improve it a bit by adding “highly exposed” and “highly vulnerable” no ?
Say no more, methinkxs.
You might have put the cart before the horse. (Just as in the climate change hoax, a correlation between two variables does not tell us which one is the cause and which one is the effect)
It was the expansion of NATO bases to Russia’s border that was the proximate cause of Russia’s intervention in the civil war in Ukraine, plus the coup instigated by the US mafia against their elected President Yanukovich.
The trade sanctions on Russia imposed by the US have backfired and caused more damage to the EU and themselves, possibly deliberately.
“The trade sanctions on Russia imposed by the US have backfired and caused more damage to the EU and themselves, possibly deliberately.
Yes, I’m saying it was deliberate.
They got the result they were after…..inflation
This is far more important to them than Ukraine.
They are trying to save the monetary system from failure.
I’m still not convinced that I am getting this.
The opening paragraph talks about : “deep interconnection of Western economies and finances, basically “joined at the hip” – also means that the other three major Western currencies will follow. Accordingly, we shall witness a cascading devaluation of euros, dollars, pounds, and yens necessarily dragging each other down in a maddening competitive “race to the bottom”.
Taken together with the section on perceived (or otherwise) gold holdings to maintain the value of two of those three ‘joined at the hips” currencies (£ & $) suggests a torrid time for all three currencies (not just the Euro) AND the economies/countries (including their populations) associated with them.
ie. That, as I have previously suggested, the UK at least will suffer at least the same level and degree of associated problems as the countries of Europe and the Eurozone.
IF this interpretation is anywhere near accurate it seems reasonable to continue to ask the question as to how the ‘Plan B’ scenario can be put into practical (not to be confused or conflated with the quite separate concept of intent) effect?
I just cannot see how the opening paragraph arguing how all three currencies are joined at the hip and are therefore all destined for a race to the bottom can be compatible with the ability of two of the currencies (£ & $) to be able to snap up assets in the third currency zone (Euro) for pennies on the $ (‘Plan B’).
For sure, there is always the scenario of differing rates of decline/change between the three currencies which might resolve such a contradiction. However, such a scenario/argument would then contradict the central argument of all three currencies being ‘joined at the hip’ – which implies what happens to one currency happens to the other two at the same rate.
I’m sorry to be a pain but this continues to nag at me.
The ultimate owners of the Federal Reserve and the EU central bank are one and the same people. The EU central bank is owned by the central bank of each EU member, that are privately owned with the exception of Deutsche Bundesbank that is 50% government owned. For the most part it is the member banks rather than the central banks that create the money supply as debt using data entries on their computers.
No debts = no money
However, the US Federal Reserve bank recently created money debt free for its own account in the amount of $9 trillion used to buy up corporate stocks and bonds to prevent their collapse.
Of course Janet Yellen, now the head of the US Treasury, blames inflation on wages paid to the workforce, but makes no mention of the $9 trillion paid out to stock and bond holders, who were bailed out at the top of the market. Where did that money go ? Real estate ?
The price of commodities including oil, are now falling from the highs of June, presumably due to a reduction in demand as a result of the higher prices people cannot afford to pay.
Dave Hansell, your comments are valid and very well taken. Please do keep them coming and please never apologize or excuse yourself here amongst your commentariati friends for you thinking differently. Critical thought is much needed and you are helping lots by making us all think harder and better. So keep at it.
True enough, all four economies & finances are joined at the hip and they will all alternatively devaluate in relation to each other and, finally, they will all devaluate very badly in respect to a universally accepted standard, i.e., gold. But some will devaluate more rapidly and/or intensely than others making the difference that Plan B requires. The point is that the really big loser with this process is Europe and Europeans at large do not seem to suspect much of it yet, although some are waking up a bit. Also losers will be those anywhere holding their bags full of euros, yens or dollars and pounds the latter of which would only be good for eventual European bargain purchases for what they might be worth.
So Europe will end up losing bad for siding with a most unnecessary Ukraine conflict provoked and led by the US. In due time, the really big winners will be Russia, China and BRICS-non-NATO countries alligned therein. Uncertainty mostly surrounds the possible fate of the UK and the US, but they will not be winners of anything valuable with the Plan B takeover of a “destroyed” Europe
You may be 101% right in saying that, in view of circumstances, there would not be any possibility for the GBP pound to be a different case than the euro per your opinion that the UK should suffer “at least the same level and degree of associated problems as the countries of Europe and the Eurozone.” I clearly see and accept such possibility Dave. The reason I do not agree could be summarized the following way :
(a) The US and the UK can “fake” or “deceive everyone” into believing they have lots of gold bullion actually vaulted. And they may actually have “some” but whatever they have they would not ever part with it. They are both in a position of extreme power regarding gold bullion and can keep on playing games pretty much forever per point (e) below.
(b) Both the US and the UK could be considered the cleanest “dirty shirts” of them all helping each other out as they always have even under current circumstances. Business is business.
(c) Both the US and the UK have a “special relationship” they both boast about
(d) The US badly needs its UK partner very close-by but not immersed in the continental debacle per sé.
(e) Both the US and the UK — the Anglo-Saxons in charge of Plan B — have an overwhelming military
capability worldwide which in a European scenario could only be matched by Russia which is fully unwilling to engage itself in crazy Western wars yet again. Russia would rather get involved elsewhere with 85% of the world´s non-Western population.
So adding (a) + (b) + (c) + (d) + (e) together — like baristas would say — just shake´em up and get the Anglo-Saxon fashionable cocktail ready for drinks.
And above all Dave you are not any “pain” as you say. Your challenges are most welcome !
Dave, the latest from Martin Armstrong.
They need a default, so they want a war.
” There is no way they can get out of this other than default. But if they default, they are worried about millions of people storming the parliaments of Europe…This is really a tremendous financial crisis that we are facing. They have been borrowing year after year since WWII with zero intention of paying anything back. ”Armstrong says, “This is why they are pushing for war. . . . They think they can create a new monetary system, and to do so, they need war so as to redesign all the currencies, and when you do that, you wipe out all the debt.
The neoliberal story of money is deeply flawed, which flaw extends to this modern day crisis of confidence. Both anthropologist David Graeber and economist/historian Michael Hudson have determined that prior to coinage, societies employed credit systems of various sophistication. Money came about with militarization and taxation.
MMT is quite clear that governments issue currency, i.e. create money, to provision themselves, then tax it back, leaving an excess for savings and commerce. Neoliberalism’s disdain for government and repulsion of taxation distorted this system out of any kind of economic balance, while financial capitalism removed any relation of money to production.
Hudson in his ‘Super Imperialism’ goes into detail how the US used its credit/debt system to enjoy a ‘free lunch’ where the entire world, including victims of US military, funded its military activities and allowed it to live beyond its means without raising taxes.
Vast structural adjustments are way overdue, and it looks to me like the reckoning will come soon.
Tedder, thanks for your valuable input, certainly very well-taken.
Actually, another important point Michael Hudson has made is the responsibility the Roman Empire has for establishing compliance thereafter nd inherited to this day regarding the “sanctity of contracts” something which always favors the creditors, not the economy or society at large.
re MMT: what I have never found though is how would traditional corruption be handled and managed under MMT. Furthermore, my additional very serious problem (please see my posted link below) is that MMT is definetly NOT “money” let alone that “we owe to ourselves” (not). Such MMT “non-money” (fiat currency) is definetly owed to investors both local and foreign (be carefull) who now require very high interest rates in order to trust the un-written contract therein in view of circumstances addressed in my article. Cordially Jorge
Tedder, furthermore please allow me to add by quoting the article itself re MMT … ” So the rates that banks should offer in order to attract investors — both foreign and local — to finance such monstrous idle debt cannot be as high as needed (15% ?). If they were, the interest accrued by the many dozens of trillions of currency debt already piled up would explode the system. Plus it would be obvious that the principal would never be returned and economic depression would instantaneously surround us. So it´s the unmanageable huge debt collapse behind it all as central bank monetization and/or taxes would have to be prohibitively high to really help out any.
So a ´moment of truth´ is before us now.
The banks do not need investors, they need debt slaves to keep profits flowing up to the 1%.
The banks in general do not lend to industry to promote increased production. But they will fund mergers and acquisitions that reduce competition and thereby increase unemployment to increase profits, that are then used to buy back their own shares to boost the stock price, on which CEO bonuses are based.
Okay banks don´t have “investors” but ´debt slaves´ then, I buy that. It´s the case of accumulated savings placed in the hands of banks in exchange for payment of interest. True that buy-backs are to be found all around us and banks do not generally lend to industry, so worse still. We should add another group of ´debt slaves´ willing to run the risk of returning the capital awarded plus interests. For example, mortgage as part of Michael Hudson´s FIRE sector. It´s just going around in circles with the same purpose and methodology. Cordially, Jorge
Jorge, thanks for another valuable article. I enjoy reading it, even if I don`t agree with you 100%. It’s a long article, though, and I’ll have to read the rest of it this weekend.
I have a quick question, though. You wrote above:
“It is not a wild tiger as real money is. It is a convenient self-cleaning household kittie cat”
Why did you choose the image of a self-cleaning kittie cat? Based on today’s situation, I’d think it is more for a pooping sewer rat, isn’t it? In particular, if you want to stick with the kittie cat for the sake of comparison, why the self-cleaning?
Thanks for your time and opinion.
HC thanks for your valuable comments.
Please do keep them coming HC, the more critical the better it´d be so we all here learn discussing amongst ourselves and thinking out loud. I have said often but I´ll repeat it yet again: this is home to me okay ? And maybe the “self-cleaning” kittie cat analogy I made was not that good, was it ? Most specially if a well-meant and open-minded reader such as yourself does not interpret it the way I meant it. So it´s necessarily my fault then and I readily admit it. The problem is three-fold: my personal time availability + restrictions regarding perishability and open time-windows for a given article content + the enormous speed of events. So please allow me to explain some stuff first and then I´ll get to your specific point HC.
(1) Trust me that writing and publishing one ´in-depth´, longish article, once a week every week is a tremendous pace for anyone, let alone someone like myself physically not that young any more (pushing 75… and in good health, but…) with grandkids and the little life I have left passing be by more than I´d want it to. Writing requires tons of time, reading, researching, drafting, re-drafting, changing content per new events, etc. etc. re-drafting yet again.. and without good typing skills. Also, I am here all by myself a one-man band, running on a shoestring budget of a Third World government bare-bones pension. I have no possessions, own no car and live in a 1-bedroom apartment 500 sq.ft.
(2) I am still tremendously grateful to Andrei and Amarynth for the opportunity to publish, and should also emphatically add that nowhere have I found the liberty and technical editing skills I have found here in “The Saker”
(3) Events happen at lightning speed so constant modifications are the name of the game and better be ready for such. In the past 6 months I have probably published close to 50,000 (fifty thousand) words which is a lot always prone to making mistakes of different sorts although not that many I am very proud to say.
Now then, the kittie cat thingy… Real money is tough, solid, and dependable. It does not back down and can be aggressive if need be. That´s the wild tiger analogy taking good care of its off-spring. Kittie cats are not that way, not tough, not solid, un-dependable. And “self-cleaning” because kittie cats only know to take good care of their own stuff, nothing else, such as currencies do. So maybe your ” pooping sewer rat” description would be better !
HC on second thoughts your “pooping sewer rat ” analogy would not be very adequate methinkxs because the top-of-mind esthetic & optics it triggers alligns with the ´ugly and pestilent´ image… which is not the actual way that Western currencies are usually perceived. For example, despite actually being real “pooping sewer rats “people do not perceive US dollars that way, do they ?
I mean, true enough, your “pooping sewer rat” analogy of course represents the real situation much better. But it also clearly reveals the actual bare truth for everyone to see, which is not the case the article pretends to discuss. People perceive dollars as “good to have”. And “pooping sewer rats” are not good to have, correct ?
Instead, my ´houselhold kittie cat´ analogy may be just as deceiving as fiat legal tender currencies are… in that not very many people understand how self-interested, un-sustainably dependent, and actually just as “dirty” they all are. And the reason is that the kittie cat cuteness and “self-cleaning” features help out to that extent. People would never guess anything negative about houselhold kittie cats, but they can be mean, I know that. All very subtle on my part I admit… still many thanks for raising the point HC ! And sure hope you don´t have a kittie at your home, do you ? Aaaahahahhhhh Cordially Jorge
Thanks for your reply. Upon further thought, I think the kitten cat image you used is more appropriate for your article than the sewer rat (it is certainly more “respectable”, and has the advantage of being the opposite to the tiger image). It was not my intention to criticize your article. I just thought I was missing part of your arguments because the self-cleaning image was not what I was expecting based on what I understood from your text.
Thanks again for your time and your writing. As I said, I enjoy them.
My best wishes to you and your family.
(and, no, I don’t have cats at my place, even though I like them.. :-D)
Dear HC, yes, I agree !
True enough, the cute ´self-cleaning kittie cat´ image impacts as truly respectable as you say.
And also nice, trustworthy, pretty and neat… but — beware — it is not. Actually it fakes its role very well and is far trickier and deceitful than the — in a way more “noble” so to speak — ´pooping sewing rat´ which only exposes itself exactly how it is: ugly and mean and dirty. But fiat legal tender currencies do not do that. We all — or almost all of us — trust them as if they were genuinely valid, and they are not !
Furthermore, your crystal clear intentions are most welcome HC !!
So your critical thought helps lots to make us all THINK out loud better.
That includes you, me, and all of the commentariati posters reading us right now.
So I thank you for it, and please do keep your challenging thoughts and comments coming in, please.
Best to you and your folks HC
Western currencies MMT failed miserably.
Not “Modern” at all (very old) does not involve “Money” in any way shape or form and it is not a “Theory” but rather daily practice.
The oil for gold payment scheme was intiated a number of years ago by Iran in order to circumvent US sanctions. At that time, oil sales were made to Turkey & denominated in Turkish Lira, and in turn, the proceeds were immediately converted into gold, which was then physically transported by designated couriers to Iran via Dubai. It was a well designed system and no doubt, served as a blueprint for what will eventuate. China already has the oil for gold platform set up at the Shanghai Exchange, but we have not yet witnessed full implementation. This will require critical mass and I believe we are seeing a step by step march towards this, as intial transactions in respective currencies are now becoming the norm. Gold is fungible and will allow transactions to occur between all parites once they have established relative valuations of their domestic currencies versus gold. It is a more complicated system, but barter once prevailed centuries ago, and we consider ourselves to be more advanced in economic thought than our forefathers, so it can and will be done. There is also a reason why most Central Banks(Asian, East & Central European – not western) have been net buyers of gold.
Thank you so much for your most pertinent explanation with a complete conceptual description and respective details. I did not know about the Iran-Turkey-Dubai scheme. Please do keep up your valuable input Ivan. Cordially Jorge
2012 – Halkbank in Turkey was at the centre of it. It really pissed off the US sanctions Masters as the trading scheme was very well thought out and effective. If you’ve ever dealt with or traded with Iranians, you would understand. Extremely sharp people.
Jorge, thank you for explaining a very complex (to me) subject. I never understood why Nixon took the U.S. off the gold standard. Since we’ve used the printing press to make money out of thin air, that money has gone to banks and military spending – nothing goes to help citizens. It’s used to prop up a corrupt system and make war on the rest of the world.
I remember when Libya wanted to accept gold instead of dollars, it wasn’t long before that country was destroyed. The petro dollar was in endangered. This is what I think the PTB are afraid of and the U.S. will lose reserve currency status. I apologize if I come off sounding like a naif, but perhaps I am. Thanks for all your great writings.
Catherine, I could not have said it any better than you and I fully endorse it. The Libya example you give is a case in point. Whatever the many defects that Muammar Gaddafi had, his major sins were (a) ejecting Western military bases and (b) trying to establish the gold-based Dinar currency.
Catherine, your type of comment makes all the difference to me.
Thanks so much for your encouragement gal. Cordially Jorge
country breakdown of metric tonnage of “supposed” gold holdings worldwide
So, after reading the article and all 90 comments the conclusion is “Gold still rules”, thanks :-D. http://owninggold.com/2016/03/gold-still-rules/
Thank you for this timely and complementary article to my own essay of a few days ago. And I salute your enthusiasm and patience in the comment section. Beautiful Job!
Tarik, fancy meeting you here !
And thank YOU so much for all those favorable comments, I´m glad you enjoyed the read.
As busy as I was drafting my own article, true enough I had not read yours yet Tarik. But I just did, and also fully agree with you in that both are/were ” timely and complimentary “. So congratulations for your own highly successfull and excellent article right here in “The Saker” last week.
PS: Tarik, at least I do try hard, and a sincere and respectfull bear hug for you !!
CONGRATULATIONS editors Andrei and Amarynth plus all ´commentariati´ at large as this article has just been RE-published by “The Automatic Earth” & “The Debt Rattle” link at