The combination of currency debasement, falling production, and rising debt always ends in credit collapse. In all history, there are no exceptions. But ten years ago, few Americans had ever considered the possibility.
Suddenly, on Aug. 9, 2007, inter-bank lending locked up; the dollar was in free-fall; and credit completely FROZE here and around the world. The following year, Bear Stearns collapsed (March); Merrill Lynch and Lehman Brothers collapsed (Sept. 15); and the stock market crashed (Sept. 29, 2008). The Dow Jones Industrial Average had the biggest one-day drop in U.S. history; Lehman was the largest bankruptcy in U.S. history.
Since the global credit-collapse in 2007, the economy has been rocked by a series of violent after-shocks: the banking system came close to locking up again in Nov. 2011, Oct. 2014, and Aug. 2015. The Federal Reserve has kept the dollar system afloat by ‘doubling down’ on the excesses that led to the debt crisis. For nine years, the world has been on the biggest debt-binge of all time (U.S. debt grew 114%).
The Federal Reserve’s remedy for the on-going debt-crisis is the creation of HYPER-CREDIT. The entire financial system is sustained by exotic financial instruments called “derivatives.”
Image by Martin Kozlowski, Wall Street Journal.
The Federal Reserve monetizes debt (here and abroad). From nowhere, trillions of dollars spring into existence (new debt becomes brand-new credit). The Fed and other central banks have created, issued, financed, or enabled an estimated 1.4 QUADRILLION dollars of derivatives debt to ‘paper over’ the fragile banking system. The number attached to this debt has three more zeros than the combined value of all of the goods and services produced on earth (10 to the 15th power)!
By definition, one thousand trillion dollars of derivatives debt “derive value (cash flows) by reference to underlying assets.” What possible collateral could give value to more than one quadrillion dollars of derivatives debt? The following logical conclusions can be made about this historic debt bubble:
- There is relatively little real collateral underlying the debt.
- The debt can be repaid only by more HYPER-CREDIT.
- The debt is merely delaying a monetary catastrophe.
- The climactic end of the bubble is certain (Herbert Stein’s LAW): “If something cannot go on forever, it will stop.”
$1 trillion = one million million dollars
$1 quadrillion = one thousand million million dollars
A few years back, Dr. Jürgen Stark, an economist with the European Central Bank, shook the financial world when he told the Ludwig von Mises Institute that the global financial system came “within hours” of collapse in Nov. 2011. He said:
“The whole system is based on pure fiction, groping since 2008 to avoid a second Lehman, which if it happens, the system will not survive.” [Professor Dr. Jürgen Stark, European Central Bank; mises.org.]
Dr. Stark told the audience that the only thing keeping the system going since 2008 is money-printing; central bankers are “flying blind;” no one knows how much money (credit) is being created or where it is going. He recommended allocating savings to traditional safe-havens such as silver and gold.
The year before the global credit-collapse, gold was $525/oz [Jan.5, 2006]. The day credit FROZE worldwide [Aug. 9, 2007], the gold price was $662.60/oz [London p.m. fix]. On March 14, 2008, people were shocked and amazed when gold surged past $1,000/oz for the first time ever. However, soon after the stock market crashed [Sept. 2008], gold dropped 30% (from $1,000 to $700/oz) and silver fell 70% (from $21 to $9/oz).
Did the precipitous fall in silver and gold prices mean low demand and abundant supply? NO. The ‘hit’ on precious metals was accomplish by “naked” short-selling.* Every scared gold-bug wanted coins; and every U.S. dealer ran completely out of coins and bars – almost overnight.
Within a few days, the supply of PHYSICAL gold and silver dried up all over the country. The major world refiners had nothing. NO gold or silver was available from the five major world mints: Canada, Austria, Perth, South Africa, and U.S. Mint. Dealers could not get delivery for well over a month. In 2011, the same thing happened; and silver deliveries were delayed even longer. When the next financial crisis rocks the dollar, will supplies of gold and silver completely disappear?
Today’s market indicators do not reflect what is happening beneath the surface. The monetary system ‘as we know it’ is coming to an end. The International Monetary Fund says a “Money Standard Shift” will be concluded during the next crisis.
BEFORE THE NEXT PANIC, PRESERVE YOUR
NEST-EGG BY SWITCHING TO REAL MONEY.
If you take delivery of silver and gold, you will have protection from illiquid markets, third-party risk, and overnight currency devaluations. Today, the price of the 1-oz gold coin above is $1,360. Since the day credit collapsed, the PAPER dollar has lost more than half of its value against PHYSICAL gold.
Submitted by Denise Rhyne.
* Gold and the dollar are competing currencies. A rising gold price indicates a failing dollar. For this reason, the trading desk of the Federal Reserve “manages” the spot price with a trading technique called “naked” short-selling. When gold and silver break to the upside, spot prices are brought down by massive, concentrated sales of derivatives (PAPER gold and silver). Contracts representing millions of ounces are dumped simultaneously on London and New York exchanges.
Things You Probably Didn’t Learn in School About Gold & Silver-pdf : Includes articles on NAKED SHORTING.