Home » Posts tagged 'monetary system'

Tag Archives: monetary system

Larry also lays out 4 key catalysts for higher gold, silver and bitcoin prices.

Friend of Fringe Finance Lawrence Lepard released his most recent investor letter a few days ago with his updated take on the seismic changes occurring in monetary policy globally as a result of the Russia/Ukraine conflict.

He takes us through history as to how this landscape has changed in the past, and what could be coming in years ahead.

Larry had joined me for several interviews last year and I believe him to truly be one of the muted voices that the investing community would be better off for considering. He’s the type of voice that gets little coverage in the mainstream media, which, in my opinion, makes him someone worth listening to twice as closely.

Larry was kind enough to allow me to share his most recent thoughts. Part 2 is below and Part 1 can be found at this link.

In Part 1, Larry reminded us of the history and structure of the world monetary system, starting in 1944 and ending in 1980, and how he uses that to make his investment decisions.

In Part 2, he picks up around 1980 and discusses current problems the Fed has.

1980-Present Gold Market

In the chart below, you can see the effect that Paul Volcker’s policies had on the dollar price of gold. By pushing interest rates up to 20%, he managed to cool inflation and ultimately stop it. This brought the gold price back to the $260 to $400 range where it lived for quite some time.

The 1980’s and 1990s were marked by a period of dis-inflation and ultimately deflation given technological innovations and productivity gains from Microsoft, Intel and the like in the 1980s, and then the Internet in the 1990s…

…click on the above link to read the rest of the article…

Turning The Wealth Pyramid Upside Down

March 11, 2022

Turning The Wealth Pyramid Upside Down

When we look at upside down wealth pyramid at the left, I have a big problem with the picture it promotes. It is clearly based on someone’s opinion of what investments are safe. The one thing it does well is to scream that some investments have a high degree of risk and it is best not to put all our eggs in the same basket.

Another issue is how a 401 or pension will fare during hard times or if we do see a huge number of defaults. Consider this an indication that placing your wealth into paper promises means it has the potential to vanish or be converted into something to would never agree to. Again, the devil is in the small print or the fact “they” can change the rules at any time.

While a great deal of speculation has been showered upon us concerning inflation turning to deflation, we will not know the true direction of things until they occur. One thing to keep in mind is that government employs a tremendous number of people that will never accept a cut in pay. This will put a solid net under falling prices. Combined with the refusal of many workers to consider working for anything near minimum wage helps push away the notion of deflation. In fact today, my local paper announced the City Council in Fort Wayne, Indiana just approved retroactive COVID-19 hazard bonuses for all city workers.

It is important to move towards forecasting based on probability rather than predictions. Keep in mind a great deal of how we deal with the options before us is centered on how we position ourselves…

…click on the above link to read the rest of the article…

A Global Monetary & Commodity Inferno of Nuclear Proportions

March 11, 2022

A GLOBAL MONETARY & COMMODITY INFERNO OF NUCLEAR PROPORTIONS

When the sh-t hits the global fan, it often does it at the optimal time for the maximum amount of damage and with the worst kind of sh-t to soil the world.

For years I have been clear that the world is reaching the end of an economic, financial and monetary era which will affect mankind catastrophically for decades.

The world will obviously blame Putin for the catastrophe which will hit every corner of our planet. But we must remember that neither Putin nor Covid is the reason for the economic cataclysm that we are now approaching.

These events are catalysts which will have a major effect because they are hitting a gigantic debt bubble of a magnitude that has never been seen before in history. And it obviously takes very little to prick this epic bubble.

What is unequivocal is that all currencies will finish the 100+ year fall to ZERO in the next few years. It is also crystal clear that all the asset bubbles – stocks, bonds and property – will implode at the same time leading to a long and deep depression.

We had the warning in 2006-9 but central banks ignored it and just added new worthless debt to existing worthless debt to create worthless debt squared – an obvious recipe for disaster.

So as is often typical for the end of an economic era, the catalyst is totally unexpected and worse than anyone could have forecast.

WAR CYCLES

Yes, I and a few others have pointed out that we are in a war cycle currently, and recent events have clearly confirmed this and hit the world with a vengeance.

Just as nobody paid any serious attention to the warning that the Great Financial Crisis in 2006-9 gave the world, few people have taken Putin’s warnings seriously since the 2014 Maidan revolution in Ukraine.

…click on the above link to read the rest of the article…

Here’s Why Our Monetary System is a Giant Ponzi Scheme

March 1, 2022

Here’s Why Our Monetary System is a Giant Ponzi Scheme

Ponzi schemes keep going until the perpetrator is stopped from the outside. They never stop by of their own volition. Bernie Madoff kept going until it all blew up.

In the year 2000 the Nasdaq composite exceeded a P/E of 200 before collapsing 78% by October 2002. The more successful a Ponzi the more egregious the bubble and resultant pain. The granddaddy of Ponzi — far greater than anything we’ve seen before — is our monetary system.

Let’s consider what money is. It is a technology that allows us to produce and consume not just in the present but across time.

It is, for this reason, that it needs to provide both a medium of exchange as well as a store of value. If for example a transaction needs to be made over a crop cycle then the value of the money needs to remain sufficiently stable over that time frame to allow the participants to make an exchange and not come out underwater. This benefits neither party to the transaction because, while in the short term party A may get an excellent deal from party B, if the deal is so “excellent” as to bankrupt party B, then no future commerce will be done and overall production declines causing less supply and a fall in the overall standard of living.

The money needs to be useful to both parties. In prisons they use cigarettes. Even if you don’t smoke enough inmates do and the cigarettes don’t change (consistency) and so they form a money.

Of course, over time we’ve used all sorts of things used as money: gold, silver, copper, even slaves. At primary school I used to use marbles and Garbage Pail Kids (ah, those were the days).

…click on the above link to read the rest of the article…

The Zombie Ship of Theseus

January 7, 2022

The Zombie Ship of Theseus

The Ship of Theseus is an old philosophical thought experiment. It asks a question about identity. Suppose you replace all of the boards of a ship with new ones—is it still the same ship?

We are not going to try to resolve this millennia-old paradox. Instead, we are going to add one more element, and then tie it to the monetary system. The additional element is what if the replacement boards are adulterated in some way. That is, each new board is warped, or weakened, or otherwise not fit for purpose.

It should be clear that replacing boards with unsound wood does not alter reality, only the ship. It does not remove any constraints such as the need to be watertight. It does not make anything better, only adds new flaws.

Let’s call this new ship, with each original board replaced with these adulterated boards, the Zombie Ship of Theseus. It looks like the Ship of Theseus. However, it does not work like it. It has been corrupted to work in a different way, i.e. to lull sailors into going out to sea, where a storm will drown them.

The History of our Warped Monetary System and Currency

So how does this relate to the monetary system and the currency? There has been a centuries-long process of replacing important boards. Let’s highlight the key changes.

The Original System

At the Founding of America, there was the original Ship of Theseus. One had the right to deposit one’s gold (we will leave out silver, as this complicates the story somewhat) and get a paper bank note in exchange. Or one could keep one’s gold, if one did not like the terms. One had the right to redeem the note, and get one’s gold back…

…click on the above link to read the rest of the article…

Perversity: Thy Name is Dollar

November 17, 2021

Perversity: Thy Name is Dollar

If you ask most people, “what is money?” they will answer that money is the generally accepted medium of exchange. If you ask Google Images, it will show you many pictures of green pieces of paper. Virtually everyone agrees that money means the dollar.

Image credit: Cildo Meireles

Breaking Down the Dollar Monetary System

What does it mean to have a dollar? If you hold a piece of paper with green ink on it, which says “ONE DOLLAR”, you may notice that it also says, at the top, “FEDERAL RESERVE NOTE”. Note is a word for credit. The dollar bill (bill is also a word for a credit instrument) is a credit of some kind, the credit of the Federal Reserve. The paper itself has no value, apart from that it is the obligation of a party whose full faith and credit is beyond question. It would be something like the fallacy of reification, to confuse the green piece of paper with the monetary value it represents.

Banking, Lending and the Fed

Most holders of dollars do not hold them in the form of actual pieces of paper. For reasons of convenience, and safety and security, people deposit them in a bank. That is, they may think of it as having dollars in a bank (just as they think of the paper as the money). But let’s drill down into that. Most people know that the bank does not just put all the green pieces of paper into a vault. The bank holds a small amount of paper cash, based on what it expects to pay during the business day. The rest, well, the bank does something–or–other with them…

…click on the above link to read the rest of the article…

Gold and Crypto: Is This How Charts Look Before A Monetary Collapse?

October 24, 2020

Gold and Crypto: Is This How Charts Look Before A Monetary Collapse?

It is the the massive debt. It cannot be serviced. It will collapse the whole system.

The gold, silver and cryptocurrencies charts are showing signs of going parabolic. The US dollar is close to confirming a massive breakdown.

Gold, silver and cryptocurrencies all provide “crisis value” by simply being an acceptable debt-based fiat alternative. It is only later in this crisis that we will see a divergence between cryptocurrency and precious metals.

For now, they are likely to move higher together.

Gold has recently made new all-time highs, and seems ready to go higher after a decent consolidation. The importance of the 2011 all-time high can be seen on these charts:

I have marked two fractals (ABC). Both fractals start from the Dow/Gold ratio peaks (1966 and 1999). For these to continue the similarity, the level ($1920) at A and C needs to be surpassed on the current fractal.

We’ve already seen the breakout, now price has just been consolidating around that level. It is very close to blasting higher.

From a cycle analysis point of view, we are right at a point where a sustained multi-year gold rally is possible:

The top chart is gold from about 1997 to 2020 (current fractal), and the bottom chart is gold from about 1965 to 1980 (70s fractals). If the current fractal continues to follow the 70s fractal, then we could see gold continue to multiples of its current all-time high.

Currently, we are just after, or close to, a major Dow peak in the economic cycle. Again, you can see that the 2011 peak is an important indicator to confirm these fractals as relevant. It could also be considered a marker after which the chart is likely to go parabolic.

…click on the above link to read the rest of the article…

Europe Has Been Preparing a Global Gold Standard Since the 1970s

July 20, 2020

Europe Has Been Preparing a Global Gold Standard Since the 1970s

Research reveals that European central banks have prepared a new international gold standard. Since the 1970s, policies that paved the way for an equitable and durable monetary system have gradually been implemented.

In my view, the current fiat international monetary system is ending—unconventional monetary policy has entered a dead end street and can’t reverse. I have written about this before, and will not repeat this message in today’s article. Instead, we will discuss a topic that deserves more attention, namely that European central banks saw this coming decades ago when the world shifted to a pure paper money standard. Accordingly, European central banks have carefully prepared a new monetary system based on gold.

When the last vestige of the gold standard was terminated by the U.S. in 1971, circumstances forced European central banks go along with the dollar hegemony, for the time being. Sentiment in Europe, however, was to counter dollar dominance and slowly prepare a new arrangement. Currently, central banks in Europe are signaling that a new system that incorporates gold is approaching.

If you want to read a summary of this article you can skip to the conclusion.

Contents:

The Rise and Fall of Bretton Woods
Europe Equalizes Gold Reserves Internationally
Private Gold Ownership Distribution
Setting the Stage for a Gold Standard
Conclusion
Sources

The Rise and Fall of Bretton Woods

At the end of the Second World War, a new international monetary system called Bretton Woods was ratified. Under Bretton Woods, the U.S. dollar was officially the world reserve currency, backed by gold at a parity of $35 per ounce. The United States owned 60% of all monetary gold—more than 18,000 tonnes—and promised the dollar to be “as good as gold.” All other participating countries committed to peg their currencies to the dollar. Bretton Woods was a typical gold exchange standard.

…click on the above link to read the rest of the article…

Red Gold: China’s Stealth Plan to Use Gold for World Domination

February 25, 2020

Red Gold: China’s Stealth Plan to Use Gold for World Domination

Gold used to be important.

During and after World War II, every major developed country amassed as much physical gold as they could. It stabilized currencies and signaled independence.

But with the end of the gold standard in 1971, most countries began to sell off their reserves.

So much so that in 1999, an agreement was formed to limit the amount of gold that central banks could sell. Fast forward to today, and Canada’s central bank owns ZERO gold.

Despite the agreement, most countries continued to shed their gold reserves as fast as possible.

That is until a few years ago, when a handful of countries reversed course. Central Banks started buying gold with fury, and they haven’t let up since.

In the final quarter of 2018, central banks purchased more gold than in any other quarter on record.

By the end of the year, central banks collectively held around 1.064 billion ounces of gold (equivalent to 33,200 tons).

That’s about one-fifth of all the gold ever mined.

In the first half of 2019, central banks purchased 11.97 million ounces of gold (374 tons). Once again, that was far more than ever before. And it’s equivalent to one-sixth of total gold demand in that period.

And total central bank gold purchases for 2019 were the second highest they’ve been in the last 50 years (2018 being the first).

The Unusual Suspects in Central Bank Gold Purchases

And the Keyser Söze of gold is Vladimir Putin.

I’ve been very quiet about Russia and Putin the last few years as I’ve been swamped with media requests following the success of my NY Times Bestseller The Colder War.

Don’t underestimate what the Russians are doing, as others are starting to follow…

While the world focuses on China, Russia has positioned itself at the center of the global political chessboard.

…click on the above link to read the rest of the article…

Gold: A Modern Investment Framework For An Ancient Asset

February 10, 2020

Gold: A Modern Investment Framework For An Ancient Asset

Gold no longer serves as an official money in the modern financial system, yet it is still considered an important asset due to its established diversification and store of value properties. But what framework(s) should we use to understand the role that gold should play in investment processes and policies? In Part I of this series, I present one useful framework which implies that gold is significantly ‘under-owned’ and, consequently, undervalued at present.

A Brief History of Gold’s Monetary Role

Most investors are familiar with the ancient use of gold and silver as money, and that gold still provided the monetary base for economies well into the 20^th century. Indeed, less than a century ago, in the aftermath of WWI and associated large currency devaluations and hyperinflations in Europe, there were several international conferences held to try and strengthen gold’s role as a source of monetary and economic stability. 75 years ago the famous Bretton-Woods conference was held, formally re-establishing gold’s role at the centre of the international monetary system.

For investors of that time, gold held a central role in investment processes. It was the bedrock collateral of the financial system – the ‘risk-free’ asset – and the benchmark for measuring investment performance. Gold was also an instrument that the central banks of the day could use to help contain financial crises. In the event of a run on deposits or an interbank collateral squeeze, central banks could lend out their reserves (normally at penalty rates of interest) in order to buy time for the system to restructure and reorganise. For example, gold lending was one of the actions taken by JP Morgan to help contain the US Banking Panic of 1907. This provided a model for how the Federal Reserve was subsequently designed to act as a lender of last resort.[1]

…click on the above link to read the rest of the article…

GOLDNOMICS PODCAST: Prepare Now As Risk Of Contagion In Today’s Fragile Monetary World

October 14, 2019

GOLDNOMICS PODCAST: Prepare Now As Risk Of Contagion In Today’s Fragile Monetary World

◆ GOLDNOMICS PODCAST – Episode 13 – Lucky for some !

◆ Why is nobody talking about the real risk of contagion to investors, savers & companies?

Listen or Watch Podcast Here

◆ While all the focus in the UK, Ireland and the EU is on Brexit, the risk of another debt crisis looms as companies, banks, governments and the global economy grapple with massive levels of debt
◆ “Contagion will impact stocks, bonds and deposits and both investments and savings across the spectrum”
◆ Prepare for the 4 C’s: i) Counter party risk ii) Credit and debt crisis iii) Currency wars and iv) Contagion
◆ Complex financial & technology systems in the fintech age make the counter parties which investors and savers rely on more fragile. This highlights the need for direct and outright legal ownership of tangible assets
◆ Financial, economic and monetary contagion risk underlines the importance of real diversification and owning gold in the safest ways possible

Bretton Woods Is Dead: What Next?

July 28, 2019

Bretton Woods Is Dead: What Next?

French Finance Minister Bruno Le Maire has publicly admitted something normally reserved for backroom discussion in the circles of Europe’s governing elite at an event honoring the 75^thanniversary of Bretton Woods (the conference which created the foundations for the post WWII world order).

At this event, Le Maire stated ever-so candidly that “the Bretton Woods order has reached its limits. Unless we are able to re-invent Bretton Woods, the New Silk Road might become the New World Order”.

He went onto state that “the pillars of that order have been the International Monetary Fund and its sister institution, the World Bank since their inception at the Bretton Woods conference in New Hampshire in 1944.”

Were a radical transformation not undertaken immediately, then Le Maire laments “Chinese standards on state and on access to public procurements, on intellectual property could become global standards”.

The finance minister’s statements reflect the growing awareness that two opposing systems operating on two conflicting sets of principles and standards are currently in conflict, where only one can succeed. Yet as much as he appears to be aware of the forces at play between two systems, Le Maire fails miserably to identify what the Bretton Woods System was meant to accomplish in the first place, or what type of “radical transformation” is needed to save Europe from the collapse of its own speculation-ridden system.

Le Maire dives so deeply out of reality that he actually believes that the radical transformation desperately needed in the west does not involve collaborating with the New Silk Road, but rather to strengthen the power of Brussels, while becoming more technocratic and more green (aka: de-industrialized, de-populated).

…click on the above link to read the rest of the article…

Entering Period of Perpetual Money Printing – John Williams

July 24, 2019

Entering Period of Perpetual Money Printing – John Williams

Economist John Williams says be careful what you wish for when it comes to Federal Reserve interest rate cuts. Williams explains, “Unless you can get a good healthy consumer, you are not going to get a good healthy economy. It’s that simple. I think the Fed recognizes that, but they want to get rates higher because that will help the banking system. It will help make lending a little easier and start to return the system to normal. The problem with them backtracking now is the Fed may not ever be able to go back and do what they did before. We may be entering a period of perpetual quantitative easing (money printing). That changes the ballgame, and I am not sure where that’s going to go. It’s not as happy as it would have been if we had gone through a transition where bad parts of the banking system failed and you rebuilt and had a strong buildup from there with the economy and everything else. . . . Perpetual quantitative easing (money printing) is frightening, and it’s a new world. No one has ever seen anything quite like this.”

Williams says all his data is showing the economy is already faltering. Williams point out, “If you believe the GDP numbers, the economy has expanded 25% since the Great Recession, but there is no other number that shows that. . . . I have been contending that we are heading into a new recession. What I am looking at in recovery is that the economy has never really recovered. . . . . The Fed raised rates too much in too fast of a period of time. Had they stretched that over a couple of more years instead of trying to get things back to normal in two years, that might have worked better. What they did was effectively crashed the economy.”

…click on the above link to read the rest of the article…

Central Banking is Central Planning

April 29, 2019

CENTRAL BANKING IS CENTRAL PLANNING

At a time when the appeal of and demands for a new “democratic” socialism seem to have caught the imagination of many among the young and are reflected in the promises of a good number of political candidates running for high office, there is one already-existing socialist institution in America with few opponents: the Federal Reserve System.

The fact is, central banking is a form of central planning. The Federal Reserve has a legal monopoly over the monetary system of the United States. It plans the quantity of money in circulation and its availability for lending purposes; and it sets a target for the annual rate of price inflation (currently around 2 percent), while also intentionally influencing interest rates, affecting investment spending, and supporting full employment. Almost all discussions and debates concerning the Federal Reserve revolve around how it should undertake its monetary central planning: which policy tools should be used, what target goals should be aimed for, and who should be in charge of directing America’s central bank.

Federal Reserve Independence in the Trump Era

A complementary issue that has received renewed attention concerns the question of how much “independence” the Federal Reserve and other central banks should have to determine and implement monetary and interest rate policy. This has recently come to the fore due to comments made by President Donald Trump concerning Federal Reserve interest rate policy and the individuals he has recently proposed for positions on the Federal Reserve Board of Governors.

Several times over the last year, President Trump has expressed irritation and frustration with increases in market rates of interest under the Federal Reserve Board leadership of Jerome Powell, who Trump nominated for Fed chairman and who has held that position since February 2018.

…click on the above link to read the rest of the article…

Tag Archives: monetary system

Content

Post categories

Economic Links

Energy/Resource Links

Environmental Links

Geopolitical Links

Liberty Links

News Links

Other Links

Survival Skills

Post Archives by Category

Post navigation

Latest Posts