Q:  Hi! I have always wonder why the British Pound is valued so high above our dollar.

Bill Holter’s Answer:

Thank you for your question Carolyn, I will try to answer even though I am no expert on foreign exchange.  First, the pound used to be valued much higher versus the dollar than it is now, I can remember when it was over three pounds to the dollar.  Without looking at British money supply, debt ratios, trade balance and GDP, my guess is as with all fiat currencies, these all factor in to the cross valuation.  Generally speaking, the various currencies have been in a race to the bottom via devaluations to support the export sector versus competitors.  It is this reason that I believe we will soon see some fireworks between Japan (who is devaluing purposely and with a vengeance) and other export driven Asian nations as they will not stand for having their sales undercut.

I do want to mention one other “tidbit”.  One British Pound Sterling used to actually be just this …”one pound of British sterling silver.” (Though the Pound is the longest fiat currency still in use, it has no backing of metal whatsoever other than by name.)   Originally one pound of silver was broken down into 240 pence (240 pennies), now one pound is broken down into 100 pence.  The term “sterling” came about nearly 900 years ago when the coins were minted 92.5% silver content as a standard.  How much is one pound of silver worth today even with depressed silver prices?  My point is this, the British Pound is not “valued so high” as you say unless of course you value it versus other fiat currencies which have also devalued drastically.  Hope this helps?

Q: Many knowledgeable people have stated that they cannot understand why things have not collapsed already.  It is common knowledge that Central Banks Collude with one another to keep the party going and everything propped up.  Question; It appears that market forces do not work any longer, everything rigged and engineered, so why could “they”, TPTB, not keep things going for as long as they want it to keep going . A year, five years, a decade or longer until such time as they want to take the system down or modify it to suit them?

Andy Hoffman’s Answer:

Because reality is catching up to them. As I wrote in “2008 is back, with one temporary exception” (/2008-is-back-with-one-temporary-exception) two months ago, piece by piece, the PPT-supported stock market is detaching from reality.  Heck, oil prices were $90/bbl. then, compared to $63/bbl. today.  Global economies are crashing, as are currencies, commodities – and now, many junk bonds.  Social unrest is accelerating, which is why Scotland, Catalonia and Switzerland had their referendums – and why Japan and Greece have “snap elections” next week.  Central banks are losing control – including the Fed, which desperately wants to remove “considerable time” from its policy statement at its meeting next week (regarding the timing until raising rates), but rates are plummeting in the faces, even as they desperately try to prop them up.

In other words, just like the paper PM markets, which are detaching from the record demand for physical gold and silver, the government-supported stock market is detaching from reality.  Watching the Chinese stock market plunge 6% today, the Greek market down 13% (yes, in one day) and Europe down 2-3% whilst the Dow is held at -1% all day, before a prototypical “hail mary” rally should tell you all you need to know of how desperate they’ve become.  No one’s paying attention anymore, and pretty soon the last remaining shreds of their credibility – and ability to hold back the tide of reality – will be gone forever.