World Bank Whistleblower Says Paper Currencies To Be Back By Precious Metals

Many people have claimed that the worlds reserve currency, the US Dollar will eventually cease to provide that role only to be replaced by a basket of currencies or one backed by gold. Karen Hudes, World Bank whistleblowe,r has confirmed that paper currency will be underpinned by precious metals.

I had the opportunity yesterday to speak with one of the western world’s most courageous and astute women, Karen Hudes, Former Senior Counsel to the World Bank—now turned whistle-blower.
It was a powerful conversation, as Karen spent 20 years with the World Bank as an attorney and economist, before being “let-go” after reporting internal fraud and corruption.
During the interview Karen indicated that the world is rapidly changing, with western power structures breaking down, economic & political influence gravitating to BRICs nations, all amid a pending currency transition which will highly favor precious metals.   Hudes stated: “All of the countries of the world are going to allow precious metals to serve as currency, and this will be an underpinning for paper currency, as we’ll have both systems at the same time.”

From Tekoa Da Silva:

Starting out by discussing the shocking centralized power she witnessed while working at the World Bank, Karen explained that, “A study done by three [Swiss] systems analysts who used mathematical modeling [shows] how the [world’s] 43,000 transnational corporations were being controlled through interlocking corporate directorates. There’s a group of 147 companies, most of them are financial institutions, and what they’ve done, is through the interlocking directorates, they control 40% of the net worth of these [43k] companies, and 60% of their earnings…so that group has been using the presidency of the World Bank as kind of a puppet to dominate the world—that’s [now] finished.”

A major shock to that centralized power base, according to Karen, was the recent move by BRICs nations leaders to bypass the World Bank for their financing needs, by establishing their own development bank. “As the BRICs [nations] economic power grows,” she explained, “they’re not going to be strangled anymore through the grabbing [of] their resources…So their decision to start their own development bank was their way of letting [world] governments know…that its time to end this corruption.” 

Major moves toward monetary independence are also being made by growing numbers of U.S. states, Karen added. She explained that, “The states are starting to have legislation recognizing gold and silver bullion as legal currency. This is [also] a very strong signal the states are sending to the federal government, that the time to get serious about ending the corruption in the financial system is now here.”

When asked her thoughts on what this all means for the world monetary system, Karen said, “What’s going to happen, is we’re going to have all the countries of the world, sit down and figure out what’s going to be the best, most orderly transition from the current system that we have, [which has] profound imbalance and unsustainable deficits…[this change] is going to happen as each country makes its preference known, because the system we have now is not transparent, and the biggest change [in the new system], is that there’s going to be transparency.”

That transparency may be found through a gold-backed currency system, Karen noted, as, “All of the countries of the world are going to allow precious metals to serve as currency, and this will be an underpinning for paper currency, [as] we’ll have both systems at the same time. This is my guess, as I mentioned—I am an economist.”

As a final comment speaking towards her difficult journey as a World Bank whistle-blower, Karen said, “I’ve been struggling now for years, to tell the American public what’s [been] going on. I haven’t gotten through, because this [financial] group has bought up the press and has been spreading disinformation systematically. That undermines the whole point of a democracy. How can voters vote without an informed opinion, without the information that they’re entitled too? So this strangle-hold on information is going to end in very short order.”

For further background on corruption in the World Bank check out the interview of whistleblower Karen Hudes.

Source: Silver Doctors, NSNBC

Peter Schiff: Its Going To Hit The Fan In Obamas 2nd Term

Peter Schiff’s interview with Varney on Fox.

• Gold is consolidating in preparation for another big move up.
• People are getting complacent and think things are getting better, but that’s only because governments are printing money. People will soon start to see the inflation.
• Japan will start to see high rises in inflation.
• Inflation is the new monetary policy for CBs.
• Markets are currently blindsided and won’t see inflation until it gets much worse.
• CPI numbers are phoney and designed to hide inflation.
• Bond bubble will eventually burst and that money will chase real goods.
• Would be shocked if there wasn’t an explosive move up in gold in next 2-3 years.
• It will hit the fan in Obamas 2nd term  – Currency crisis & Sovereign debt crisis.

Venezuela Devalues By 46%

Venezuela was ahead of the rest when Chavez repatriated the country’s gold. Now it looks to have stolen a lead in the currency wars. If history has thought us anything it’s that those who devalue fair best. The question remains who will be next to devalue so openly or will nations continue to do so via stealth mode via money printing.

While the rest of the developed world is scrambling here and there, politely prodding its central bankers to destroy their relative currencies, all the while naming said devaluation assorted names, “quantitative easing” being the most popular, here comes Venezuela and shows the banana republics of the developed world what lobbing a nuclear bomb into a currency war knife fight looks like:

• VENEZUELA DEVALUES FROM 4.30 TO 6.30 BOLIVARS
• VENEZUELA NEW CURRENCY BODY TO MANAGE DOLLAR INFLOWS
• CARACAS CONSUMER PRICES ROSE 3.3% IN JAN.

And that, ladies and gents of Caracas, is how you just lost 46% of your purchasing power, unless of course your fiat was in gold and silver, which just jumped by about 46%. And, in case there is confusion, this is in process, and coming soon to every “developed world” banana republic near you.

From Bloomberg

Venezuela devalued its currency for the fifth time in nine years as ailing President Hugo Chavez seeks to narrow a widening fiscal gap and reduce a shortage of dollars in the economy.

The government will weaken the exchange rate by 32 percent to 6.3 bolivars per dollar, Finance Minister Jorge Giordani told reporters today in Caracas. The government will keep the currency at 4.3 per dollar for some products, he said.

A spending spree that almost tripled the government’s fiscal deficit last year helped Chavez win his third term. Chavez ordered the devaluation from Cuba, where he is recovering from cancer surgery, Giordani said. Venezuela’s fiscal deficit widened to 11 percent of gross domestic product last year from 4 percent in 2011, according to Moody’s Investors Service.

The move can help narrow the budget deficit by increasing the amount of bolivars the government gets from taxes on oil exports. While a weaker currency may fuel annual inflation of 22 percent, it may ease shortages of goods ranging from toilet papers to cars.

In the black market, the bolivar is trading at 18.4 per dollar, according to Lechuga Verde, a website that tracks the rate. Venezuelans use the unregulated credit market because the central bank doesn’t supply enough dollar at the official rates to meet demand.

Source: ZeroHedge, Bloomberg

Path From USDollar to New Gold Note Global Trade System

Much has been written of the coming demise of the US dollar and a possible return to the gold standard. Jim Willie explores how he believes this will come about and what to expect along the way. 2013 being the key year.

The crux of the non-US$ trade vehicle devised as a USDollar alternative will be the Gold Trade Note. It will enable peer-to-peer payments to be completed from direct account transfers independent of currency, and most importantly, not done through the narrow pipes and channels controlled by the bankers with their omnipresent SWIFT code system among the world of banks. The Gold Trade Note will act much like a Letter of Credit, serve as a short-term bill, and maybe even push aside the near 0% short-term USTreasury Bills that litter the banking landscape. Any bond or bill earning almost no interest is veritable clutter. The zero bound USTreasurys open the door in a big way for replacement by a better vehicle. The new trade notes will involve posted gold as collateral, whose entire system for trade usage will bear a massive gold core that also will include silver and platinum, maybe other precious metals. The idea is to avoid the FOREX systems, to avoid the USDollar, and to avoid the banks as much as possible in a peer-to-peer system that can be executed between parties holding Blackberry devices or simple PC to complete the payments on transactions. If Gold is ignored by the corrupt bankers, then Gold will be the center of the new trade system and the solution in providing a globally accepted USDollar alternative.

 Do not be surprised to see the Chinese Yuan later as interchangeable with the Gold Trade Note. But first the Yuan must be convertible into the many major currencies actively traded in the world. Numerous reports have come in recent weeks that the Yuan currency will soon have a gold backing, yet unconfirmed. My expectation is for the Chinese Yuan eventually to be interchangeable with the Trade Note. That will signal its implicit gold backing. While many events and steps are not known, and many surprises will be thrust on stage, the guiding pathways are slowly coming to light.

Currency wars ongoing with no sign of abatement.

The list of nations undergoing active currency intervention is growing markedly. Currency manipulation actions are routine, each action inviting a reaction by other nations. It is not just Japan and the United States, the usual suspects. It is Luxembourg, Switzerland, South Korea, Sweden, Norway, and Brazil. Heck, even the venerable England has taken steps to create a Chinese Yuan swap facility. They do not wish to be left out when the Yuan becomes a more global currency, with full convertibility. London is aiding the path to a convertible Yuan. Who’d a thunk it? London wishes to remain a major trading center. Look for someday soon a Chinese Govt Bond auction denominated in Yuan, the offering managed by London banks. Such a development is not welcome news for New York, which must be seething with anger and flush with disgust. This is the more than a currency war, but rather a global currency tumult and transformation, with grand tectonic shifts, on the disruptive path to a return of the Gold Standard.

The Swiss and Japan will make an eventual switch from the current system to an Eastern orientated solution.

Watch for the Swiss and Japan to knock on the door for entrance in the Eastern Alliance, which will produce the USDollar alternative. It requires a critical mass for success. The stress felt in these two nations will motivate their pursuit of the USDollar alternative solution. They are being seriously wounded by the fiat paper currency system with floating rates.

The G20 meeting held in Russia later in the year(Sept) is one to watch out for as Willie suspects the plans will be put in place in the rumoured absence of US/UK.

Rumor is circulating in London that neither the United States nor the United Kingdom will attend the G-20 Meeting in Moscow. Refusal to attend by the Anglos would open a giant gate to coordinate plans by the leading Eastern nations (trade participants) on the new trade settlement system with attendant platforms. Rather than creating a new and better currency, they are more likely to establish a gold-backed trade settlement process that will render the USDollar obsolete. Failure to attend by the US-UK tagteam of financial fascists would ignite the Eastern-led consortium on motivation toward the launch of the new system in a more open public vocal manner with press conferences. The Third World awaits the nations that refuse to become part of a growing critical mass in global trade, which desires a more fair and equitable system of trade settlement. It is coming, but awaits a climax of collapse.

Source: silverdoctors

US: Fiscal Disaster Up Ahead

Excellent video presentation from McAlvaney Wealth Management of the fiscal disaster up ahead and how to prepare for it.

2013: Let The Currency Wars Truely Begin

Up until now the G20 countries were shafting each other quietly through various means of currency devaluation. Many new terms for printing money were added to the lexicon. Lately the rhetoric has begun to get more aggressive. ZeroHedge writes of the Russia’s Central Bank Chief’s warning that “the world is on the brink of a fresh currency war”. Along with gold repatriation stories, 2013 is shaping up to be a tough year ahead for Central Bankers.

It will not come as a surprise to anyone who has spent more than a few cursory minutes reading ZeroHedge over the past few years (back in 2009, then 2010, and most recently here, and here) but the rolling ‘beggar thy neighbor’ currency strategies of world central banks are gathering pace. To wit, Bloomberg reports that energy-bound Russia’s central bank chief appears to have broken ranks warning that “the world is on the brink of a fresh ‘currency war’.” With Japan openly (and actively) verbally intervening to depress the JPY and now Juncker’s “dangerously high” comments on the EUR yesterday, it appears 2013 will be the year when the G-20 finance ministers (who agreed to ‘refrain from competitive devaluation of currencies’ in 2009) tear up their promises and get active. Rhetoric is on the rise with the Bank of Korea threatening “an active response”, Russia now suggesting reciprocal devaluations will occur (and hurt the global economy) as RBA Governor noted that there is “a degree of disquiet in the global policy-making community.” Critically BoE Governor Mervyn King has suggested what only conspiracists have offered before: “we’ll see the growth of actively managed exchange rates,” and sure enough where FX rates go so stocks will nominally follow (see JPY vs TOPIX and CHF vs SMI recently).

Via Bloomberg:

The world is on the brink of a fresh “currency war,” Russia warned, as European policy makers joined Japan in bemoaning the economic cost of rising exchange rates.

“Japan is weakening the yen and other countries may follow,”

 …

 The push for weaker currencies is being driven by a need to find new sources of economic growth as monetary and fiscal policies run out of room. The risk is as each country tries to boost exports, it hurts the competitiveness of other economies and provokes retaliation.

 Yesterday “will go down as the first day European policy makers fired a shot in the 2013 currency war,” said Chris Turner, head of foreign-exchange strategy at ING Groep NV in London.

 …

 The skirmish may lead to a clash of G-20 finance ministers and central banks when they meet next month in Moscow, three months after reiterating their 2009 pledge to “refrain from competitive devaluation of currencies.”

 While emerging markets have repeatedly complained about strong currencies as a result of easy monetary policies in the west, the engagement of richer nations is adding a new dimension to what Brazilian Finance Minister Guido Mantega first dubbed a currency war in 2010.

Source: ZeroHedge

Failure On COMEX Silver Likely

We finished December with a large takedown of both gold and silver by the central banks cartel but already the COMEX is showing signs of strain in coping with demand in silver. Banks with short positions (used to suppress the price) are unlikely to be covered in 2013 and so there is likely to be a failure on the COMEX.

Matterhorn Asset Management’s Lars Schall has released an excellent interview with GoldMoney’s Alasdair Macleod, discussing the latest take-down of the metals post QE4, the outlook for gold and silver, and cartel manipulation of the metals.
Macleod states that massive amounts of physical gold and silver have been flowing to Asia, and that the latest bank participation report indicates massive problems are brewing for the banksters in the COMEX silver market.  With cartel shorts near a record at just under 300 million net ounces, yet with the silver price substantially lower than the 2011 high, Macleod believes that we are quite likely to have a failure on COMEX and in the silver market in particular.

Regarding the latest bank participation report, Macleod states that commercial shorts are at record highs, yet NO SILVER IS AVAILABLE!:

“Bank shorts are at or near record levels. And what is interesting is that with the prices of gold and silver well below the all-time highs there are no profit-takers in the market to sell contracts to close their shorts. And in silver it is very, very alarming. This leads me to think that we are quite likely to have a failure on COMEX and in the silver market in particular.

If you have a failure in silver on COMEX then that is going to affect the gold futures market as well. The West’s central and commercial banks have suppressed the price of both gold and silver by supplying central-bank gold and increased short positions, making prices far too cheap. The result has been a massive transfer of gold and silver to Asia. This is the relevance of the point that you have been raising about Central Banks gold holdings, and it is also going to bring into question the solvency of the bullion banks who are short.

So, I think that while it may not be obvious to many people at the moment, when we look back at the fourth quarter we will see that the conditions were in place for a huge bear squeeze, for silver in particular. I would assume that the short position in gold is more controllable so long as Western Central Banks continue to make bullion available to the bullion banks that are short either on COMEX or with LBMA. But silver is different, nobody has it for sale. There is no silver around.”

Macleod goes on to state that gold will be remonetized, and the process is already well underway:

“I suspect that the Chinese Yuan will play a big role in Asia. What they’re doing with Iran is interesting. They’re settling net balances in gold and gold is being re-monetized in that sense. And I think that China has accumulated a lot more gold than they officially tell us. So they have the potential to use gold as money. I can see gold being re-monetized in the loosest sense for the largest internal market the world has ever seen. Believe me, it’s happening now.”

Macleod also states that the upcoming physical silver crisis at the COMEX will result in a suspension of silver trading at the COMEX, and a reset massively upwards in the price of silver:

“You’ve got the banks’ short position on COMEX which cannot be covered. According to the most recent bank participation reports, the banks are short of nearly 300 million ounces of silver. When you bear in mind this is an industrial metal, the vast bulk of silver consumption from mining and recycling supply goes into biocides, solar panels, electronics, et cetera. You have only 100 million ounces annually left over for investors. The short position for the banks on COMEX is three times that 100 million ounces.

There’s no way this can be covered without a price rise sufficient to kill off significant industrial demand, because there are no strategic reserves to draw on. The only country which might have strategic reserves is China but otherwise there are no reserves. And I think that the only way in which the banks’ shorts could be closed out is after a price hike which would lead to billions of dollars of losses for these banks. There will be a market crisis, and I think that they will have to suspend trading in silver and agree a settlement procedure for long and short contracts. And if that happens, it will be well over $50 an ounce. But remember, other exchanges will continue to price silver if Comex suspends, which will not help Comex resolve the problem if the price continues to rise elsewhere.”

On another question, Macleod was asked about Yuan as the next reserve currency being backed by gold :

“We must also understand that the dollar is for security reasons not something they want to use for their international trade settlements. Remember that every dollar transaction done in the world is reflected in a bank account in New York. So, the Chinese want to get away from the potential control and the intelligence information that it gives America. They want to use a different settlement medium.

Now, they agreed about 10 years ago with the Russians to set up the Shanghai Cooperation Organisation (SCO), and the last unsatisfied objective of the SCO is to have a common trade settlement system between the members of the SCO, which at the moment are Russia, China, and the various “stans” in middle-Asia. But interestingly, the next wave of members who will join are India, Iran, Pakistan, Mongolia and Afghanistan (as soon as NATO has left). So you’ve really got the bulk of Asia’s four billion people and they’re going to be settling cross-border trade not with the dollar but with something else. They need to be gold-rich to give confidence to their currencies. I suspect that the Chinese Yuan will play a big role in Asia. What they’re doing with Iran is interesting. They’re settling net balances in gold and gold is being re-monetized in that sense. And I think that China has accumulated a lot more gold than they officially tell us. So they have the potential to use gold as money. I can see gold being re-monetized in the loosest sense for the largest internal market the world has ever seen. Believe me, it’s happening now.”

Source: SilverDoctors

 

Gold In Iran Up 23% In Last Week

Iran’s currency the rial  lost over 40% of it value against the dollar last week. There are already stores of hyperinflation emerging from the country that has been majorly hit by sanctions.

“Better buy now,” advised the rice merchant in Tehran. The retired factory guard took him up on the advice, buying 900 pounds of the stuff to feed his extended family for the next 12 months.

“As I was gathering my money,” the retiree told The New York Times, he got a phone call. “When he hung up, he told me prices had just gone up by 10%. Of course, I paid. God knows how much it will cost tomorrow.”

The 3 stages of inflation as described by Austrian economists are:

In the first stage, people still hang onto their money, expecting prices to come down. In the second stage, people part with their money to stock up on goods before prices rise again. In the final hyperinflationary stage, people buy anything they can get their hands on — even if they don’t need it — because the goods are more valuable than the currency.

But as the currency continued to collapse despite the best efforts of the Iranian Central Bank, the people are turning to gold.

Just over a week ago were the first to shed light on the reality of hyperinflation on the ground in Iran – and subtley suggested the whole thing could be watched in real-time. Soon after, a mysterious cabal of 16 currency manipulators was arrested and the Rial jumped dramatically higher (according to official sources) – as if by magic there was no problem at all. This all sounded a little too good to be true (just like unemployment rates in slightly more controlled economies). Sure enough, by the power of social media, we now know it was too good to be true.

As open-market foreign exchange rates – not just Rial-to-Dollar – have disappeared from the major currency exchange sites, as trade has reportedly slowed to near suspension after the Central Bank ‘imposed’ a rate of 28,500 Rials to the USD this weekend.

Critically, though, via EAWorldView, while the ‘real’ rate for the Iranian Real is effectively blacked out, gold prices continue to soar. ‘Old gold coin’ is now selling for 16 million Rials, up 23% from the pre-suspension 13 million Rial levels – even as the

Central Bank tries to suppress reality (especially to the rest of the world’s gaze) as hyperinflation continues – though less transparently.

Source: Forbes, ZeroHedge

Wolfson Interview on EuroZone Exit

Wolfson interview with RT on exiting the euro.

China To Be Major Gold Trade Center

It should come as no surprise that China, the world’s largest gold producer and buyer should want to become a major gold trading center. The Wall Street Journal has reported such plans after being briefed by an insider.

China has proposed to broaden trading of precious metals in its local market in order to help China become a “major gold trading centre” (see News).

The Wall Street Journal was briefed about China’s plans by “a person involved with the matter.” The paper reports that “the move could increase liquidity and help Beijing gain stronger pricing power for key commodities like gold”.

China is the largest consumer and now the largest producer of gold in the world and has aspirations to become a major gold trading center on a par with London and New York. China is also the fifth largest holder of gold reserves in the world after the U.S., Germany, France, Italy (see table).

Clearly they have ambitions far beyond a major Gold trading center but as a worlds reserve currency, possibly even THE worlds reserve currency.

Chinese officials have spoken of China’s aspirations to have gold reserves as large as the U.S. in order to help position the yuan or renminbi as a global reserve currency. Indeed, it would be only natural for China to aspire to have their currency become the global reserve currency in the long term.

In the longer term, being a major gold trading center would make China a more powerful financial and economic player and indeed could allow them to influence commodity and other important market prices. Indeed, Reuters reported that becoming a major gold trading center “would boost the country’s clout in setting global prices”.

The journal reports that “Beijing’s tight grip on commodities trading and rigid capital controls are among the obstacles in the way.”

The move is also part of the broader financial reforms that Beijing has launched in recent weeks, loosening some of the restrictions on securities investment and allowing banks to price loans at cheaper rates than in the past, that seek to grant market forces a bigger role in both the economy and the capital market.

The moved proposed by market officials would expand trading of precious metals from designated exchanges to the country’s vast interbank market, according to the person involved. The Shanghai Gold Exchange has released draft rules for such interbank precious metals trading, which will include spot, forward and swap contracts for the commodities, said the person.

Current limitations.

At the moment, producers, consumers and investors can trade only spot and futures contracts in gold and silver on the Shanghai Gold Exchange and the Shanghai Futures Exchange, respectively.

Due to limited membership on the two exchanges, many investors, including banks, aren’t able to directly trade the precious metals on the exchanges.

The draft rules were jointly developed by the Shanghai Gold Exchange, which is the world’s biggest marketplace for spot gold trading, and the China Foreign Exchange Trading System, a central bank subsidiary that oversees onshore currency trading.

Plans are afoot to get around this and expand gold trading.

According to the draft rules, the authorities are aiming to launch the interbank trading on Aug. 31, starting with gold contracts, said the person.

That would make gold the first commodity to trade on the interbank market.

The authorities will introduce a “market maker” system for the planned precious metals trading—the first time the system will be used to trade a commodity on the interbank market—with transactions done on an over-the-counter basis as compared to the exchange-based pricing mechanism.

Market makers are firms that stand ready to buy and sell a product at a publicly quoted price to facilitate trade.

An over-the-counter market would allow investors, in this case banks, to trade in large quantities that far exceed the Shanghai Gold Exchange’s current trading volumes, analysts said.

According to the draft rules, banks are allowed to use the new precious metals contracts in the interbank market for proprietary trading only.

The Shanghai Gold Exchange is inviting banks, mostly members of the exchange, to submit applications to take part in the trading, said the person, who expects most major and midsize banks to participate.

The move to let banks become market makers also shows the authorities’ desire to give such better-established and more sophisticated institutions more power in setting prices for major commodities, a common practice in developed markets, said Jiang Shu, senior precious metals analyst at Industrial Bank Co.

Current restrictions and capital controls remain an obstacle to China becoming major gold trading center and to the renminbi becoming an accepted global reserve currency.

The move by China to expand precious metals trading to their glowingly important and vast interbank market is important and another step towards China becoming an economic power on the world stage and one that will rival European nations and the U.S.

Source: Goldcore

Brazil Signs Currency Swap Deal With China

There has been many headlines over the last year from countries agreeing to drop the US dollar when trading with each other but ZeroHedge has managed to sum it very well as the latest headline to hit us is the currency swap deal between Brazil and China. This makes Brazil the largest country yet to agree to swap currencies with China.

When the US Dollar is ultimately dethroned as the world’s reserve currency (and finally gets rid of all those ridiculous three letter post-Keynesian economic “theories”) nobody will have seen it coming. Well, nobody except for the following headlines: “”World’s Second (China) And Third Largest (Japan) Economies To Bypass Dollar, Engage In Direct Currency Trade“, “China, Russia Drop Dollar In Bilateral Trade“, “China And Iran To Bypass Dollar, Plan Oil Barter System“, “India and Japan sign new $15bn currency swap agreement“, “Iran, Russia Replace Dollar With Rial, Ruble in Trade, Fars Says“, “India Joins Asian Dollar Exclusion Zone, Will Transact With Iran In Rupees.” And while the expansion of the “dollar exclusion zone” was actually quite glaring to anyone who dared to look, one thing was obvious: it was confined to Asia. No more courtesy of the following FT headline: “Brazil and China agree currency swap.” More: “Brazil has provided a vote of confidence in China’s efforts to promote the renminbi as a reserve currency by becoming the biggest economy yet to agree a swap deal with Beijing. Brazil and China announced the R$60bn (US$29bn) local currency swap after a bilateral meeting between Wen Jiabao, the Chinese premier, and Dilma Rousseff, Brazil’s president, on the sidelines of the Rio+20 environmental summit in Rio de Janeiro.”

How many headlines are needed to get the message, the US Dollar is in decline ?

 

Source: ZeroHedge

What Happens When Fiat Currency Dies?

Nice article on ZeroHedge explaining the steps of a fiat currency dying.Funny ting is, the pattern has remained the same for the last 4000 years. Why would it be any different this time?

 

This is today’s reality. It can happen here, it probably will happen here. And frankly, it’s all unfolding almost exactly as it has so many times before throughout history:

1. A nation rises to greatness and becomes wealthy based on sound principles and the hard work of initial generations.

2. Eventually, being wealthy becomes the natural expectation… an entitlement, rather than a goal to work hard for and achieve.

3. A nation begins living beyond its means to maintain the high life without the hard work, leveraging its credibility to trade tomorrow’s production for today’s consumption.

4. Living beyond its means eventually becomes unsustainable. Government begins to slowly, then staggeringly, devalue its currency.

5. The market (i.e. people) finally wake up to the fraud being perpetrated.

6. Financial repression usually follows– high taxes which steal from the productive, negative real interest rates which steal from the savers, etc.

7. Capital flight comes next. People take their money and run.

8. Governments implement capital controls, border controls, price and wage controls, and anything else they can do to maintain the status quo. People find out who the police are really there to protect and serve.

9. Capitulation (default) is the endgame; the system resets itself and begins anew.

This is nothing new. From the 3rd Dynasty of Ur (2000 BC) to Medieval Venice to the familiar stories of Rome and the Ottoman Empire, the world is full of monuments to the past greatness of failed civilizations.

We’re seeing the same pattern unfolding now. And sure, anything’s possible. Maybe the skies open up and the unicorns come out to play and the whole world manages to fix itself without skipping a beat.

But let’s live in reality: there are consequences when nations go bankrupt. And nearly every western nation on the planet is insolvent. That is a fact.

Certainly, the lies from our political leaders are entertaining. But how many more revolutions, riots, defaults, bank runs, stimulus packages, nationalizations, tax increases, pension grabs, etc. will it take to acknowledge what’s happening?

Can anyone afford to keep ignoring reality? Can you?

Worlds Currency Reserve Status Does Not Last Forever

Iceland’s Economic Recovery Is Blueprint For Eurozone

It’s funny how Iceland’s economic success has been almost completely ignored by the presstitutes. In Ireland, which started out on a similar route to Iceland, has an almost complete media blackout of the Iceland success story. In any debate of bank debt in Ireland, at no point has Iceland’s decision to renege on its banks odious debts ever mentioned. This is in direct contrast to what the Irish government did. In fact, refusing to give the Irish a referendum, unlike Iceland, shows Democracy doesn’t exist. Maybe it should be called Dumb-ocracy, because the electorate are kept as dumb as possible, like mushrooms, kept in the dark and fed shit.

As regards to the eurozone, Iceland points the way to growth and how a small nation can actually survive when odious debt is removed. It takes a brave move from its people to overrule the politicians and stand up to the bankers. How many times have we heard in the last year from eurozone politicians, who admit that the euro was ill-conceived, only to move further into the danger zone by proposing a fiscal union as the final solution to all of europe’s problems. If they got it wrong originally with the euro, why listen to politicians about any economic decision, because clearly they are making the wrong decisions in Europe.

Is it any reason then we hear nothing of Iceland’s economic recovery, because the politicians don’t want anyone to know, that life can be better outside the euro.

In 2008, Iceland was the first casualty of the financial crisis that has since primed the euro zone for another economic disaster: Greece is edging toward a cataclysmic exit from the euro, Spain is racked by a teetering banking system, and German politicians are squabbling over how to hold it all together.

But Iceland is growing. Unemployment has eased. Emigration has slowed.

Iceland has a significant advantage over stressed euro-zone countries—a currency that could be devalued. That has turned its trade deficit into a surplus and smoothed its recovery.

Iceland has control over its fishing industry and is not limited to fish quotas that other european countries have to work with. Business within the fishing industry is booming and looking for workers.

So brisk is the fish business that Mr. Palsson’s factory draws Polish workers to this island off an island, a heart-shaped dollop of volcanic rock five miles from Iceland’s south coast.

“Every house is full because we can offer so many jobs,” said Mr. Palsson, 37 years old. On his humming factory floor, cod whip through machines that lop off heads and slice out bones. Rows of workers in Smurf-blue smocks lean over illuminated tables to cut the filets.

Iceland—with its own currency, its own central bank, its own monetary policy, its own decision-making and its own rules—had policy options that euro-zone nations can only fantasize about. Its successes provide a vivid lesson in what euro countries gave up when they joined the monetary union. And, perhaps, a taste of what might be possible should they leave.

So what happened and how did Iceland recover?

Iceland fell hard in 2008. Its engorged banking system sunk and unemployment soared. The government was jeered out of office by dispirited voters in angry street protests. Young people packed their bags. As in the euro zone, the International Monetary Fund parachuted in with a bailout.

Its currency devalued by half. That boosted exports, like Mr. Palsson’s fish, and trimmed costly imports, like cars. The weakened krona was hard on homeowners who borrowed in foreign currency, but Iceland’s judges and policy makers orchestrated mortgage relief. Expensive foreign goods also ignited inflation. Consumer prices have risen 26% since 2008.

That rescue, in turn, weighed on the financial system. But unlike Ireland, for example, Iceland let its banks fail and made foreign creditors, not Icelandic taxpayers, largely responsible for covering losses.

Iceland also imposed draconian capital controls—anathema to the European Union doctrine of open financial borders—that have warded off the terrifying capital and credit flights that hit Greece, Ireland and Portugal, and now test Spain and Italy.

And instead of rushing into the sort of spending cuts that have ravaged Greece and Spain, Iceland delayed austerity. Initially, the country even increased social-welfare payments to its poorest citizens, whose continued spending helped cushion the economy.

Difference between Iceland and Greece.

Exiting the euro would be traumatic for Greece, even if it could benefit from devaluation. Iceland’s open economy is much more geared toward trade; Greece’s €52 billion in exports last year amounted to 24% of its gross domestic product. Iceland’s exports reached 59% of GDP. Icelanders heat and power their homes with geothermal energy; the Greeks import their energy and would suffer a huge price shock after a devaluation.

Bond rate.

Earlier this month, Iceland sold $1 billion in 10-year bonds at 5.875% interest. That is a lower rate than what Greece, Ireland or Portugal would pay, if they had access to financial markets at all. In March, Iceland began repaying its IMF loans ahead of schedule.

Adjust imbalances internally (austerity) or through currency devaluation?

Righting imbalances is hard inside the euro zone. There, the policy is so-called internal devaluation, a euphemism for making populations poorer. In theory, pushing down wages makes export industries more competitive with foreign competitors. In practice, it is difficult to lower wages without hurting the domestic economy.

In Ireland, the most successful of the euro zone’s bailed-out countries, the policy has spurred a revival in exports but at the cost of high unemployment and lower domestic consumption. In Iceland, by contrast, the devalued currency forces residents to buy less from abroad and shift their purchasing home.

“We are seeing in Greece and in Southern Europe how painful it is to adjust through the labor market,” said Tryggvi Thor Herbertsson, a member of parliament for the conservative opposition party. “To adjust through the currency,” he said, “is so much less painful.”

 

Common sense tells us that the euro€ has been an absolute DISASTER, its time to return to our own currencies and take back control.

Source: Wall Street Journal

Who Is Crashing The System

Its long been the solution in the current global financial system that instead of letting it collapse to sort out the debt, the printing press is turned on and another bubble created until the next crisis. On and on it goes creating a bigger bubble of debt. Now we are  at a point that the debt bubble is just to big. Robert Fitzwilson wrote this exclusive piece for King World News outlining his view that rather than kick the can further down the road the PTB are about to finally collapse it.

“We know that the world’s debt-based, fiat money system can only be revived and sustained by the combination of more debt creation and consumption.  We have arrived at a critical point in history.”

“It has been a common belief, ours included, that there are two alternatives, print more fiat money or risk a catastrophic global depression.  A sane person will only choose the ‘print’ option that leads to the avoidance of an economic Armageddon, even if the effect is just temporary.

But, what if this is a flawed scenario and set of assumptions?  What if there is another path, and that path is to effectively crash the system?  We all know that the accumulated and accrued obligations cannot be repaid and paid, respectively. 

We are in a destructive feedback loop in which new fiat money is created to pay for current and growing expenses, effectively creating even more obligations for future taxpayers.  Individuals are told that other people will be taxed to pay for their entitlements when the reality is that they are creating future obligations for themselves.

While not a prediction, it is wise to consider another alternative….

Collapse it now rather than money printing.

“Any thinking person with a calculator knows that the current global monetary system is going to fail given enough time.  Rather than going through the charade of more quantitative easing, what if the central banks, the collaborating Western governments, and the financial elites decide to let the system fail now?

We know that the stock market has risen on the supportive hands of the U.S. Federal Reserve.  This has been a publicly stated policy designed to engender a ‘wealth effect’ making consumers more likely to ramp up their spending.  We know that Treasury bonds have also benefitted from the Fed’s largesse.

We also suspect that the markets for paper gold and silver have been ‘massaged’ by the same institutions.  Not wanting to see high gas prices for the coming election, we also suspect that the recent decline in the price of oil and the jawboning from Saudi Arabia are not coincidental.

….

 We also found out last week that cracks were appearing for the players in the derivatives game.  Greece is threatening to renege on their outstanding obligations to European banks.

New dollar to preempt other countries attempt to undermine the dollar’s reserve status.

Investors need to consider the possibility that people in control are not simply trying to scare the public as they have done during the last 8 trading days, but a larger plan might be afoot.  That plan could be to accelerate the emergence of a new dollar.

Other countries are taking actions that are designed to dethrone the dollar’s dominance.  Some of these actions are making headway, perhaps too much headway.  If the threat of success becomes too great, a preemptive strike to bring down the financial and commodity markets before strong rivals emerge is a possibility to consider.

It would not be the end of the dollar as the king of currencies, just the end of the current dollar as we know it.  The new dollar could be realigned not only against other currencies, but would allow for the effective repudiation of the massive piles of debt and derivatives.  Interest rates would be allowed to return to more normal levels and all assets would be re-priced in terms of the new dollar.

It might seem crazy to sane people, but to insane people running global government and finance, it might seem rational to them.  Their constituencies will not care.  They vote for a living and will not care about the colors and digits on their checks.  It will sound Utopian, a return to fixing the problems of the past and restoring functioning markets at the same time.  Debts go away as does the dreaded austerity.  Wealth will be destroyed, but the vast majority of people have no wealth to preserve.

Precedence to crashing the system.

There is precedence for crashing the system as a technique.  It was the leaking of information about the financial condition of AIG in 2008 that sent markets into a tailspin.

We will see.  Portfolio allocations should continue to over-emphasize assets where the prices have been suppressed and avoid assets where prices have been manipulated higher.  The latter could prove quite dangerous until the question of whether the original path of more QE or the hypothetical situation above is known to investors.”

Ireland – New Currency Solution

Steve Keen has proposed a solution to Ireland’s debt problems with a new currency IRP which be issued on a 1:1 basis with the euro. Over time for every euro spent will be taken out of the economy to pay off Ireland’s debts and change given in the new IRP. This would be done until eventually the debt is paid off, and then the IRP can be given up and traded back to euros afterwards. check out the full proposal below. Of course its radical ideas like this that can sort out this problem but will our banker owned politicians go for this. The answer lies in how well-informed our electorate are and how politically active they want to become. My opinion is “Normalcy Bias” will win the day as usual.

An excellent idea which could be used for other eurozone countries.

View this document on Scribd

 

 

Source: A plan for economic recovery

10 Reasons US Dollar’s Reign To End

Poorrichard wrote a convincing post on the end of the US dollar as world’s reserve currency based on current global moves. Below are the 10 poorrichard described but I’m sure there are other reasons not mentioned. The situation in Iran alone has caused multiple problems potentially for the dollar.

Regardless, I think most people would agree we are looking ahead at major economic, financial, political and social changes. Wether the US dollar stays as World’s reserve currency remains to be seen but it is taking a battering right now.

#1 China And Japan Are Dumping the U.S. Dollar In Bilateral Trade
A few months ago, the second largest economy on earth (China) and the third largest economy on earth (Japan) struck a deal which will promote the use of their own currencies (rather than the U.S. dollar) when trading with each other.  This was an incredibly important agreement that was virtually totally ignored by the U.S. media.  The following is from a BBC report about that agreement….

#2 The BRICS (Brazil, Russia, India, China, South Africa) Plan To Start Using Their Own Currencies When Trading With Each Other
The BRICS continue to flex their muscles.  A new agreement will promote the use of their own national currencies when trading with each other rather than the U.S. dollar.

#3 The Russia/China Currency Agreement

Russia and China have been using their own national currencies when trading with each other for more than a year now.  Leaders from both Russia and China have been strongly advocating for a new global reserve currency for several years, and both nations seem determined to break the power that the U.S. dollar has over international trade.

#4 The Growing Use Of Chinese Currency In Africa
Who do you think is Africa’s biggest trading partner?
It isn’t the United States.
In 2009, China became Africa’s biggest trading partner, and China is now aggressively seeking to expand the use of Chinese currency on that continent.
A report from Africa’s largest bank, Standard Bank, recently stated the following….

“We expect at least $100 billion (about R768 billion) in Sino-African trade – more than the total bilateral trade between China and Africa in 2010 – to be settled in the renminbi by 2015.”

China seems absolutely determined to change the way that international trade is done.  At this point, approximately 70,000 Chinese companies are using Chinese currency in cross-border transactions.

#5 The China/United Arab Emirates Deal
China and the United Arab Emirates have agreed to ditch the U.S. dollar and use their own currencies in oil transactions with each other.
The UAE is a fairly small player, but this is definitely a threat to the petrodollar system.  What will happen to the petrodollar if other oil producing countries in the Middle East follow suit?

#6 Iran
Iran has been one of the most aggressive nations when it comes to moving away from the U.S. dollar in international trade.  For example, it has been reported that India will begin to use gold to buy oil from Iran.
Tensions between the U.S. and Iran are not likely to go away any time soon, and Iran is likely to continue to do what it can to inflict pain on the United States in the financial world.

#7 The China/Saudi Arabia Relationship
Who imports the most oil from Saudi Arabia?
It is not the United States.
Rather, it is China.
As I wrote about the other day, China imported 1.39 million barrels of oil per day from Saudi Arabia in February, which was a 39 percent increase from one year earlier.
Saudi Arabia and China have teamed up to construct a massive new oil refinery in Saudi Arabia, and leaders from both nations have been working to aggressively expand trade between the two nations.
So how long is Saudi Arabia going to stick with the petrodollar if China is their most important customer?
That is a very important question.

#8 The United Nations Has Been Pushing For A New World Reserve Currency

The United Nations has been issuing reports that openly call for an alternative to the U.S. dollar as the reserve currency of the world. In particular, one UN report envisions “a new global reserve system” in which the U.S. no longer has dominance….”A new global reserve system could be created, one that no longer relies on the United States dollar as the single major reserve currency.”

#9 The IMF Has Been Pushing For A New World Reserve Currency

The International Monetary Fund has also published a series of reports calling for the U.S. dollar to be replaced as the reserve currency of the world. In particular, one IMF paper entitled “Reserve Accumulation and International Monetary Stability” that was published a while back actually proposed that a future global currency be named the “Bancor” and that a future global central bank could be put in charge of issuing it….”A global currency, bancor, issued by a global central bank (see Supplement 1, section V) would be designed as a stable store of value that is not tied exclusively to the conditions of any particular economy. As trade and finance continue to grow rapidly and global integration increases, the importance of this broader perspective is expected to continue growing.”

#10 Most Of The Rest Of The World Hates The United States

Global sentiment toward the United States has dramatically shifted, and this should not be underestimated. Decades ago, we were one of the most loved nations on earth. Now we are one of the most hated. If you doubt this, just do some international traveling. Even in Europe (where we are supposed to have friends), Americans are treated like dirt.  Many American travelers have resorted to wearing Canadian pins so that they will not be treated like garbage while traveling over there. If the rest of the world still loved us, they would probably be glad to continue using the U.S. dollar.  But because we are now so unpopular, that gives other nations even more incentive to dump the dollar in international trade. So what will happen if the reign of the U.S. dollar as the world reserve currency comes to an end? Well, some of the potential effects were described in a recent article by Michael Payne….”The demise of the dollar will also bring radical changes to the American lifestyle. When this economic tsunami hits America, it will make the 2008 recession and its aftermath look like no more than a slight bump in the road. It will bring very undesirable changes to the American lifestyle through massive inflation, high interest rates on mortgages and cars, and substantial increases in the cost of food, clothing and gasoline; it will have a detrimental effect on every aspect of our lives.”

Austerity Can’t Work, You Need to Devalue Your Own Currency!

David McWilliams put it well when talking about austerity not working, he said

Yet the really strange thing is that it(austerity) is billed as being mainstream economic thinking. It is not mainstream economics, it is highly radical. What is mainstream and proven is the power of devaluations. Yet those recommending the course of action that mainstream economics tells us to do are labelled radicals.

Because Ireland isn’t able to devalue, it chooses the austerity route.

Therefore, government spending will be reduced dramatically. But if the government is not spending, who is?

We should be, but we are not because we are worried about the future, so we are saving. Who is spending the missing 11pc of our income which has just been taken out of the Irish economy? Now here is where our policy gets a bit hopeful to say the least because in order for our economy to stay just as it is, foreigners need to massively increase their buying of Irish goods.

Ireland has tried an “internal devaluation” through cutting wages. Latvia has tried a similar soultion, but how does this stack up with Iceland who simply devalued their currency and became competitive overnight.

Irish and Latvian wages have remained more or less the same since 2008 against our competitors. In contrast, Icelandic wages against its competitors have fallen dramatically. Iceland has become dramatically more competitive vis-a-vis Ireland and Latvia because it devalued its currency dramatically in 2008/09. Iceland in one sharp devaluation has achieved what Ireland and Latvia are supposed to achieve over years of grinding down wages. If we are supposed to achieve Icelandic levels of wage competitiveness, we will have to shrink the economy over the next few years. By having their own currency the Icelandics did in a few weeks what we have been trying — unsucessfully — to do over four years.

We are currently being told that the euro breaking up is a terrible thing but David McWilliams is of the mind that having your own currency and devaluing is the solution.

Having its own exchange rate allows a country to adjust quickly. Yes, living standards when measured in euro fall, but that has to happen in both the Irish and the Icelandic case. The question is how do you achieve this and are you giving your people a chance?

There is a reason why no economy in the world has ever emerged from a recession like ours without changing its exchange rate. The reason is that it simply can’t be done. There is no evidence anywhere, ever, that shows that a country can operate a successful “internal devaluation” — particularly an economy carrying as much debt as we have.

Is Irelands “internal devaluation” really working?

Much is made of the “flexibility” of the Irish labour force. But the flexibility is not in wages but in levels of unemployment. The Irish labour market adjusts alright, but the adjustment comes not in falling wages but in rising unemployment and emigration. This is what we don’t want to happen, yet this is what the policy is leading to.

So those getting paid too much in Ireland still get paid too much, yet the people who feel the real cost of the “internal devaluation” are those who lose their jobs because rather than cut wages, employers cut staff.

When people are laid off, it is very difficult to get a new job because no one is spending in the economy. The government is not spending and the people are not spending. But what about the the much heralded export-led growth which postulates that foreigners will buy loads of Irish goods, more than compensating for the fall in domestic spending?

Well it doesn’t happen, partly because Irish wages don’t fall as we can see in the chart, so Irish goods are no more competitive than they were a few years ago. Yes, exports have risen, but nowhere near enough to offset the local contraction. This is why unemployment has trebled in three years and why emigration is running at over 1,000 people a week. It is not that the policy of internal devaluation is not working, it can’t work. It has never worked anywhere, ever.

As economists who propose the normal tried and tested solution to carrying too much debt, i.e. devaluing your currency, now politicians and the MSM are labelling them as radicals or extreme.

The truth is that what is extreme is following a policy which has never worked anywhere and the cost of which is mass unemployment and mass emigration. Now that is truly radical.

 

Gold Is Independent Money and Why Fiat System is Corrupt

Short video which explains why countries went off the gold standard and obvious problem of inflation that comes from that.