by Scott Causey, GWP Resource Correspondent
Has the US Dollar Lost its Luster
Imagine you and your partner in the delivery room, excited about the arrival of your first born, but when the child arrives, he or she is black when you and your partner are both white. In this circumstance, finding yourself with a child of a different race, most would be able to quickly conclude that somewhere along the line something dubious occurred.
Finance, sadly, is not as simple to figure out and just as dubious. Frankly, the sociopaths who are running the current system are smarter, better connected, and possibly get laid more often; however, times are changing. When the tide started to roll out in 2008, it started to become a lot easier to see “who was naked and who was not,” (borrowed from Uncle Warren).
Around August of last year the United States officially lost its vaunted AAA rating; this set off a chain reaction of hundreds of rating downgrades around the world. After all, if the world’s reserve currency is no longer seen as “AAA,” then what entity should have the privilege of the highest rating?
Markets around the world are still contemplating that question as bank after bank and country after country are continually downgraded by the rating agencies. Ahh… the rating agencies, the very same agencies that were so timely with warning of the coming collapse of mortgage backed bonds.
Wait! No, that’s not quite right is it? Let’s get back to the aforementioned dubious behaviors: sovereign nations have a vested interest to keep their interest expenses as low as possible. Care to guess what happens to a rating agency that doesn’t play ball?
Ask Egan Jones; the threats against them reached a fever pitch recently when Italian police raided their offices and threatened to shut them down. So, what’s the real relationship between these agencies and sovereign nations? Ratings agencies are bought and paid for lackeys. They give the impression of safety so that debt may be pushed through the financial system. This gives the impression that sovereign nations are still financially viable. The entire system implodes once investors no longer have the confidence that these debts will ever be repaid.
Currently, the IMF and World Bank are openly calling for gold to play a larger role in the economic system. Excuse me, come again? Two institutions whose existence can be largely credited to the Bretton Woods Agreement of 1971, which abolished the gold standard and ushered in the nightmare era of derivatives, are now calling on gold? Talk about a full circle.
Why? Why now? Because confidence, or the illusion thereof, is what makes money. This illusion allows the sociopaths to continue to print more of it and perpetuate the system that has made them rich enough to make King Midas blush. Globally the bond market is worth tens of trillions of dollars. Yields are rising in almost all areas of the world as debt continues to saturate countries to the point that interest expenses alone are beginning to outstrip their GDP. Economic growth then slows or becomes nonexistent. Debt service then becomes impossible.
The United States losing its AAA rating has only accelerated these trends. The world is looking for a “safe” place for their fiat dollars. In a world where no one is really AAA anymore, central banks around the world (for the first time in four decades) are buying gold, and the World Bank and IMF are on board…tell me again what your excuse is for not saving in the currency of kings, instead saving in the currency of liars? You may be thinking that CNBC is right and gold is now in a tremendous bubble; just look how “high” the price is.
Have you ever heard the old adage “institutional money is the smart money”? Well, apparently when it comes to gold it might not be that smart at all. Although gold has nearly doubled 3 times in the last 10 years only 0.15% of institutional money worldwide is invested in physical gold and gold equities. If this figure only went to 1%, you would be cussing yourself for years at how cheap 1600 dollar gold was.
Goldman Sachs has been “legally” stealing money for years by front running the Fed’s moves in the treasury market. Since they and every other reserve bank around the world are net buyers of gold, maybe it’s time you did a little front running of your own. 0.15% is a low base to build off of, no? If not, email me and I’ll be happy to set you up with a “high yield” savings account with a TBTF bank.
[Scott is our resource correspondent and general go-to guy for all things related to oil, natural gas, copper, gold or silver. If you want to know how many ounces of silver taken from the ground in June in Argentina, Scott likely knows the answer off the top of his head. He is a full-on anarcho-capitalist, has lived in several different countries, and is always looking for ways to avoid the upcoming economic doomsday.]