THERE IS BUILDING EVIDENCE, TO ME, THAT THE DOLLAR, PERHAPS ALL FIAT MONEY, HAS SEEN ITS DAY.
WHAT WILL HAPPEN IF "MONEY" DIES?
THE TREND TOWARD A RETURN TO THE GOLD STANDARD IS OBVIOUS.
WHEN ALAN GREENSPAN SAYS THE DOLLAR IS BASICALLY "PLAY MONEY"...WELL...
THE ABOVE VIDEO IS AN INTERVIEW WITH ALAN GREENSPAN ABOUT THE (HOUSING) BUBBLE BURST.
"AMERICA'S FIAT MONEY, WE NEED A GOLD STANDARD"
"We have at this particular stage a fiat money which is essentially money printed by a government and it's usually a central bank which is authorized to do so. Some mechanism has got to be in place that restricts the amount of money which is produced, either a gold standard or a currency board, because unless you do that all of history suggest that inflation will take hold with very deleterious effects on economic activity... There are numbers of us, myself included, who strongly believe that we did very well in the 1870 to 1914 period with an international gold standard."
Greenspan went perhaps a bit further in an interview on 'Meet The Press', 2010 :
"There is no doubt that the federal funds rate can be fixed at what the Fed wants it to be, but wh[at] the government has no control over is long-term interest rates, and long-term interest rates are what make the economy move. And if this budget problem eventually merges to the point where it begins to become very toxic, it will be reflected in rising long-term interest rates, rising mortgage rates, lower housing. At the moment there is no sign of that because THE FINANCIAL SYSTEM IS BROKE and you can not have inflation if the financial system is NOT working."
TRANSLATION: "We will be in DEFLATION until the BROKE financial system becomes unbroke... and THEN we will have HYPERINFLATION."
You may watch the video here:
HOW TO PREPARE FOR WHEN MONEY DIES
<<If dollar-dumping turns from a trickle into a flood, look out. Exploding prices (aka exorbitant inflation) resulting from the devaluation of the dollar will compound the problems we saw in 2007-2009. Catastrophe will come when everybody realizes that the dollar is an "IOU nothing." That's the downside in the decade(s) ahead, according to Casey Research Chairman Doug Casey [DC] in an interview with The Gold Report [TGR]
"'One thing that's for sure is that although the epicenter of this crisis will be the US, it's going to have truly worldwide effects. The US dollar is the de jure national currency of at least three other countries, and the de facto national currency of about 50 others.
The main US export for many years has been paper dollars; in exchange, the nice foreigners send us Mercedes cars, Sony electronics, cocaine, coffee - and about everything you see on Walmart's shelves. It has been a one-way street for several decades, a free ride - but the party's over.
Nobody knows the numbers for sure, but foreign central banks and individuals outside the US own US dollars to the tune of something like $6 or $7 trillion. At some point, foreign dollar holders will start dumping them; they are starting to realize this is like a game of Old Maid, with the dollar being the Old Maid card. I don't know what will set it off, but the markets are already very nervous about it. This nervousness is demonstrated in gold having hit $1,900 an ounce, copper at all-time highs, oil at $100 a barrel.
Some countries are already trying to get out of dollars, but it could become a panic if the selling goes from a trickle to a flood. So, yes, it's a time bomb waiting to go off, or maybe a landmine waiting to be stepped on. If a theatre catches fire and one person runs out, soon everybody rushes toward the door and they all get trampled. It's a very serious situation.
TGR: The concept of going to a gold standard seems impossible in the sense that there is only so much gold above ground - 6 billion ounces? Maybe $11 trillion worth? But it's only a fraction of the US GDP. Even with gold at $2,000 an ounce, that leaves an immense gap. In that scenario, how do you convert to a gold standard?
DC: In terms of today's dollars, gold should probably be a lot higher than it is. I don't know what the number will be, because a lot of those dollars will disappear in bankruptcies; they will dry up and blow away. It's like a real estate development that was worth $1 billion on somebody's books; when it fails, that's $1 billion destroyed. It's a question of the battle of inflation (with the government creating dollars to prop things up) against deflation (where businesses fail and wipe out dollars). But put it this way: the US government reports it owns about 265 million ounces. Its liabilities to foreigners alone are at least $6 trillion.
If they were to be redeemed for a fixed amount, that would require roughly $22,000 PER OUNCE of gold. And that doesn't count dollars in the US itself.
I'm a bargain hunter and a bottom fisher, and bought most of my gold at vastly lower prices. But I think gold is going much higher because most people still barely even know that the stuff exists. As inflation picks up, they are going to want to get rid of these dollars - but what other monetary commodity can they turn to? So, gold is going higher. I'm still accumulating gold.'">>
WELL, GOLD WILL NEVER SEE $22,000 AN OUNCE, WILL IT?
Gold-Backed Dollar Puts 'Fair Value' at $10,000 an Ounce
Bloomberg - If every US dollar in circulation were actually backed by the full faith and credit of incorruptible gold and not by politicians' hollow promises, you would need approximately 10,000 greenbacks to buy one ounce of the yellow metal, a recent report maintains. Dylan Grice, a London-based global strategist at French bank Société Générale, crunched the numbers and says that the $10,000 figure is the actual "fair value" of gold. Significantly, the calculation suggests that in playing catch-up, gold has the potential to quintuple its current spot price. Read full article: http://www.bloomberg.com/news/2011-09-15/gold-backed-dollar-signals-10-000-metal-price-chart-of-the-day.html >>
China Buys Gold to Challenge US Dollar
<<America's diplomats know the world will one day pull the plug on the US dollar's life support system. A recently published, unredacted Wikileaks cable from the US Embassy in Beijing shows that the concern has, in fact, been at the front of their minds. The cable quotes an editorial in a Chinese government-sponsored newspaper claiming Beijing is increasingly buying gold to encourage the rise of monetary alternatives; in effect, as the cable quips, to "kill two birds with one stone" by simultaneously undermining the US dollar's and euro's status as reserve currencies. Read full article: http://www.aljazeera.com/indepth/features/2011/09/201199175046520396.html >>
Dylan Grice of Societe Generale, in 2009, published a research report entitled "Popular Delusions: A Minskian roadmap to the next gold mania."
Here is an excerpt:
<<Central bank hoarding of gold in 1970 ushered in the famous gold bull market. With central banks likely to be net gold purchasers in H2 2009 for the first time since 1988
the same starting gun is ringing out today. The price at which the USD would be fully backed by gold (as it was during the peak of the 70s mania) is $6,300. So there is a case for gold being “cheap.” Moreover, the 70s bull market was facilitated by tight energy markets, overly accommodative central banks and nervousness that policymakers had lost their way. Sound familiar?
Some commentators have mockingly suggested that the Reserve Bank of India's recent decision to buy 200m tonnes of IMF gold signals the top of the market in the way that heavy selling by the UK signaled the bottom in 1999.
This is cute. But I think it's wrong. Like today, central banks weren't buying gold in the late 1960s to prop it up, they were abandoning attempts to prop up the dollar. Gold feels frothy today, but the Indian purchase of IMF gold eerily parallels the French purchases of the late 1960s. And ill policy winds are blowing in its favour. With the precious metals consultancy GFMS estimating that central banks will be net buyers of gold for the first time since 1988, have the Indians just sounded the same starting gun the French did in 1965?>>
UNCHANGING FUNDAMENTALS [OF BUYING GOLD]
<<It's important to understand the fundamental reasons for owning gold, and those reasons have not changed. The US government embarked on a decades-long spending spree of historic proportions. To finance the resulting debt, the Federal Reserve is printing money furiously. Because most every central bank governor appears indoctrinated in the Keynesian economic philosophy, foreign central banks are simultaneously printing euros, yen, francs, yuan, and pounds to "keep up." Of course, this competitive devaluation actually represents countries shooting themselves in the foot.
Don't expect any abrupt changes either. The Fed's philosophy - a resolute faith in central planning and debasement - has been unchanged since Paul Volcker stepped down as Chairman in 1987.
Rather than considering any change of direction, the Federal Reserve Board is likely asking itself: "Should we print $50 billion or $500 billion in our next round of stimulus?" "Can the ECB bailout Greece now or do we first need to bail out the ECB?" "Should we call our money-printing 'liquidity assistance' or 'quantitative easing'?"Or perhaps, "Do we have enough ink refills for all those printing presses?"
You may think I'm joking, but this is quite serious. While monetary policy was bad under Greenspan, Ben Bernanke has literally instituted a revolutionary devaluation program for the dollar. And gold is the only way to avoid his guillotine.>>
THIS IS ALL WELL AND GOOD FOR THOSE WHO CAN AFFORD TO EXCHANGE PAPER MONEY FOR PRECIOUS METALS, BUT WHERE DOES THIS LEAVE THE VAST MAJORITY OF PEOPLE ON EARTH?
WHERE DOES THIS LEAVE THE POOR, THOSE WHO DON'T HAVE EVEN $5.00 TO INVEST IN GOLD, OR THE MIDDLE CLASS WORKERS WHO ARE STRUGGLING TO SUPPORT FAMILIES AND PAY MORTGAGES, WHO HAVE NO SAVINGS TO SPEAK OF?
I CAN'T WRAP MY MIND AROUND WHAT THIS WILL DO WHEN, OR IF, OUR AMERICAN "MONOPOLY MONEY" GOES THE WAY OF THE WIND.
I WISH YOU ALL WELL.