For time immemorial governments have sought distractions from – and scapegoats for – their own failures; and nowhere is the record more clear than the long, sorry history of fiat currency regimes. Whether via coordinated actions or indirect consequences, the end result is always the same – as like trapped rats, governments will do anything to survive.
In the case of 21st century America, nearly a century of “superpower” status is nearing its end; principally due to abuse its “reserve currency status” – but equally so, the inevitable “catch-up” of the Eastern hemisphere on the global political and economic stages. Undoubtedly, the Chinese Yuan – or some version of it – will usurp the dollar’s hegemony, just as occurred to seemingly invincible Portuguese, Spanish, Dutch, French and British fiat currencies in prior centuries.
Once the world’s debt capacity was breached at the turn of the century – and “peak dollar” reached – America has made a series of self-destructive, alienating steps that appear unfathomable, but in the bigger picture are just the natural responses of a dying empire. The wisdom of some of these actions are still up for debate; but unquestionably, its hyperinflationary monetary policy, imperialistic military, overbearing government, and historic deficit spending have accelerated the day of reckoning – in which the dollar is dramatically reduced in value, and the American standard of living weakened commensurately. This event – or process – will shock the world, but particularly Americans who have long believed they were entitled to the best of everything. I genuinely fear the social unrest coming to our shores, but more so, the potential for World War III.
You see none of the aforementioned currencies were utilized in global trade – as opposed to the dollar, which not only is tops in trading volume, but as a percentage of sovereign wealth reserves (53% versus 63% at the turn of the century). Thus, when the Fed prints money, the hyperinflationary impact is felt the world round – particularly in lesser developed nations, where citizens spend higher percentages of their income on food and other life necessities. This is why unrest following the post-2008 printing party was first experienced by “Arab Spring” nations, and why the list of inflation casualties is rapidly multiplying. Eventually, the Fed’s actions will “climb the ladder” to the top rung destroying the dollar itself.
In the meantime, unrest is festering in exponential fashion; as in a world with seven billion people, the “holes in the dyke” multiply extremely rapidly. Trust us, it’s no “coincidence” that revolutions are ongoing in the Ukraine, Iraq, Thailand, Turkey, Brazil, Argentina and other nations from the four corners of the globe. And if you think this is bad, just wait until the money printing really starts expanding. Which, of course it must, given that by definition, fiat currency regimes are Ponzi schemes that must exponentially expand to survive.
This year, we have written ad nauseum of how sovereign interest rates would plunge in Japan-like fashion as the global economic collapse broadens; that is, until hyperinflation inevitably arrives. Which, when it does, will render trivial concepts like interest rates moot – in lieu of survival and wealth preservation. And thus far, we have been decidedly right, despite more than a year of “recovery” and “tapering” propaganda and associated government market intervention. To that end, history’s most vicious precious metal suppression scheme appears to be on its last legs as evidenced by the 24/7 attacks that are decidedly failing to influence worldwide physical demand – and in fact, have only accelerated it.
Regarding today’s title, we are not trying to be alarmist. To the contrary, we are simply pointing out the reality of where the world stands. Between the dramatic escalation in Ukraine – not just militarily between the government and “separatists,” but politically, between the U.S. and Russia; the exploding violence in Gaza; and now, incredibly, America re-entering Iraq under the guise of “preventing genocide,” the odds of an “Archduke Ferdinand Moment” catalyzing global military mobilization have never been higher. And in a world where no less than seven nations are nuclear capable, what could be more terrifying?
Despite unprecedented market manipulation, the global equity bubble that we deem the “largest ever pink elephant” is unraveling; and as I write early Friday morning, the benchmark 10-year Treasury yield is down to a post-taper low of 2.38%. Gold is up sharply this week – and this morning. However, care of the most blatant, virulent suppression scheme of all time, it has been subjected to a “2:15 AM” EST attack – at the open of London paper trading – every day this week, and 275 of the 310 trading days since Obama had a “closed door” meeting with the leading TBTF bank CEOs in April 2013. Think about it, gold has started 90% of all trading days this year with an attack at the open of Western paper trading, despite it being the world’s best performing asset class! This is what we discussed in yesterday’s “Gold and Silver Manipulation, in the eyes of the Chinese”; who, in our view, will inevitably swamp the Western Cartel’s best efforts.
Only time will tell how the dollar – and other leading Western currencies – collapse, and we can only pray such events are not catalyzed by catastrophic military confrontation. However, the odds of the “best case scenario” are quite low; and thus, if you aren’t taking steps now to protect yourself, you and your heirs’ could face significant financial difficulty in the coming years – and perhaps, generations. Fortunately, said suppression has provided a rare window in time to insure against such events at subsidized prices; which, we assure you, will rapidly dissipate once the “end game” commences. Below is another perfect example of how PM manipulation have inadvertently created the buying opportunity of a lifetime, depicting how the price of silver has never been more oversold against the dollar at anytime in the past 15 years – and by a longshot!
Only you can decide what the most prudent allocation of your assets is, but as for us, we’ll stick with the only assets to have stood the test of time – much less, the cataclysm of war, inflation and unrest.