The word is in and governments agree, the U.S. Dollar is toilet paper fiat …
>China now dominates physical #bullion markets, with deliveries at roughly two-thirds of the world’s annual mine supply 😱
Follow the money! https://t.co/1crwPc4pIK
— 🍿 Hobbit 👽 (@BrianDColwell) April 11, 2019
“There is little doubt there is a recession ahead, the only question is of its likely depth. The massive build-up of unsustainable global debt since the Lehman crisis tells us to expect the liquidation to be substantial. The reversal of foreign buying of Dollars and U.S. Treasuries is bound to raise funding costs to unsustainable levels (for the U.S. Government) and put the Dollar itself under pressure. It is the sheer scale of the problem which is … shaping up to be a collapse of fiat-money arithmetic, the end of the fiat-money delusion, when the denial of gold in preference for an unbacked dollar finally ends.” – Zero Hedge
The #dollar’s plight…
"Adjusted, #gold price is close to level seen in 1971, when America was forced to abandon the Bretton Woods Agreement. The tensions from a valuation perspective therefore confirm a far higher gold price is very likely." – @zerohedge #geopolitics $gld pic.twitter.com/rovtRGukbY
— 🍿 Hobbit 👽 (@BrianDColwell) April 11, 2019
Zero Hedge’s article points to geopolitical tensions and the selling of U.S. Dollar assets, which are fiat-based, for gold, a hard-money asset and proven store-of-value (SoV), as reasons contributing to our next global financial crisis. As stated, China’s and Russia’s actions are a direct result of poor monetary policy from the United States. But how bad is it, really? How naughty has the U.S. been?
Well, since the last financial crisis (2008/2009), the U.S. has been printing money like a mofo …
Over the last 100 years, U.S. inflation has averaged around 3% annually. At that level of inflation, in 20 years, a Dollar would lose 45% of its purchasing power. That’s amazing. Now, consider money printing levels since 2008/2009 … any chance inflation is actually above our 100 year average? (that’s sarcasm, in case you didn’t notice). To illustrate this loss of value, consider the additional debt the United States must take on for each $1 of GDP growth:
- 1970-1979: $1.50 (oops … the United States went off the gold standard in 1971)
- 1980-1989: $3.00
- 1990-1999: $3.30
- 2000-2017: $4.00
According to the balance, the U.S. debt-to-GDP ratio for Q4 2018 is 105%, while during the market crash of 1929 the debt-to-GDP was merely 16%.
“This debt level is too high. The World Bank says that debt greater than 77% is past the ‘tipping point.’ That’s when holders of the nation’s debt worry that it won’t be repaid. If you review the national debt by year, you’ll see one other time the debt-to-GDP ratio was this high. That was to fund World War II. Following that, it remained safely below 77% until the 2008 financial crisis.”
That’s right … the U.S. is growing by printing more money and taking on more debt, money backed only by the word of a central bank far too used to the Dollar’s status as the world’s reserve currency. But, like in the Matrix, people are waking from their central authority-induced slumber … waking to find destruction. Seeking a solution to the problem, governments distance themselves from the U.S. Dollar by hoarding gold while others seek perceived alternatives such as Bitcoin.
Regardless of the route taken, the world has accepted that a Dollar today is worse less than it was yesterday, and that the solution is a return to hard monies.
Because the Dollar is no longer backed by any real asset, the value of the Dollar becomes a matter of Schelling Points, with the current market price of a Dollar against other assets (such as gold) interpreted as predictions of the probability of an event, in this case the U.S.’s absolute need to print more money and take on more debt, thus further reducing the purchasing value of the Dollar. For those who believe we’ve entered uncertain times, I’m hoping this blog post will show instead that we’ve reached very certain times … the demise of fiat currencies.
Thanks for reading!
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