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We are
living in unprecedented times. The perceived prosperity that the world has
enjoyed in the last 100 years and in particular the last 40 years is coming
to an end. The debt based wealth that has been created is now at great risk
of imploding both for nations and for individuals. Never before in history
have most major nations been on the brink of bankruptcy. In addition, the
world financial system is bankrupt and only still standing due to false
valuations of banks’ toxic assets. The risk of sovereign or bank
failures is major. It is therefore critical for investors to eliminate
counterparty risk. Throughout history gold is the only currency that has
survived and maintained its purchasing power. All other currencies have been
printed to oblivion. Gold represents the best insurance against a fragile
world financial system. But due to the fragility of the banks and the massive
counterparty risk, investors must hold physical gold and store it securely
outside the banking system. The mess in the world both politically,
economically and financially is deteriorating at a rapid pace.
Can it get worse? Of course it can. We have only
seen the beginning of the collapse of the credit enhanced bubble economy.
Every single country in the world is having problems. In addition to the
European and US economies, the economies of India, China, Japan, Korea to
mention just a few are all turning down fast.
In addition the problems in the MENA countries
(Middle East, North Africa) are getting a lot more severe. I have said in the
last few years that the situation in this area is likely to deteriorate
dramatically with riots, social unrest, civil war as well as interference by
other nations. And it will spread further than the current areas of unrest in
Libya, Egypt, Iran, Sudan, Lebanon, Yemen, Morocco, and Tunisia etc. The
mixture of famine, poverty, political unrest and oil is very dangerous and
will sadly lead to continued conflict. Removing leaders or dictators is not a
solution and is more likely to lead to anarchy.
Circus
Europe
Europe is turning into a real circus.
The British MEP Nigel Farage is absolutely
brilliant in his attack on the delusional Eurocrats.
In this speech
from 12 Sep. 2012 (click here if not visible on your mobile device) in which he attacks Barroso’s
and the EU leaders’ creeping dictatorship, who are oblivious, of the EU
collapsing all around them. In every country the situation is deteriorating.
Irish banks need more money mainly due to a catastrophic property market. The
Greek mess continues on the country’s way to bankruptcy. And Spanish
loan delinquencies have now soared to a 50 year high. This debt will of
course never be repaid. Spanish house prices continue to collapse and were
down 14% in Q2 2012.
In all this mess the Eurocrats
are trying to introduce more regulation and more control of a system which
needs just the opposite. A bank union with full oversight of the banks is now
proposed to be implemented by 2014. In addition Barroso
is proposing a Federation of European States with a New Treaty. The costly EU
and Euro zone experiment has totally failed and now its unelected and unaccountable
leaders are attempting to increase their power in order to precipitate the
total collapse of this monstrosity.
And the circus continues. Germany cannot stop the
ESM according to the German Court. But they can veto it. In any case the court
only allowed Germany to contribute €190 billion which is a drop in the
ocean for the drowning Euro zone which will need trillions. But the German
Finance Minister Schäuble stated that the ECB
doesn’t have mandate to print money. No wonder Nigel Farage is having fun in the European parliament with
every politician in the EU having his own interpretation what everyone can or
cannot do whilst everything is collapsing around them.
USA Next
The US has enjoyed a relative calm in the last few
years since all the attention has been on Europe. But the debt and deficit in
the US dwarfs what is happening in Europe. And the difference in the US is
that there is no attempt whatsoever to cut the deficit of around $1.5
trillion p.a. or the unfunded liabilities which are growing by $10 trillion
p.a. The world is now starting to worry about the massive danger to the rest
of the world of the greatly indebted US economy. The dollar is now coming
under pressure and opposite to many “experts”,
it is not the Euro that will collapse next but the dollar. All currencies
will continue their fall to their intrinsic value – Zero. It is just
that against each other they can‘t all fall at the same time. But
against gold they are already down 97-99% since the creation of the Fed in 1913
so there isn’t far to go to Zero.
The Fed is now starting its permanent and unlimited
QE3 guaranteeing a hyperinflationary depression. QE1, QE2 and operation Twist
have not helped. Nor have Zero interest rates. So the fed is lending and
creating unlimited amounts of money and providing it at no cost and still the
economy cannot recover. But a system with free and unlimited amounts of paper
money can never work and this is why the US and the whole world are in an
irreparable situation.
CONCERTED
MONEY PRINTING Central Bank Balance Sheet
 
Money Printing continues worldwide. Within a short
period of time, the ECB, Fed, BoE (England) and BoJ
(Japan) have all announced major printing packages.
I have been forecasting joint action by the central
banks for some time and although it didn’t take place at the same time,
it was clearly coordinated. And this had to happen because without it the
financial system will collapse and sovereign states would run of money. But
the money printing is no remedy to a bankrupt system. The chart above
from The Times in London shows how the Central Bank balance sheets
have exploded since 2007 with the UK and Switzerland up 4.5 times, the US up
over 3 times and Europe 2.5 times. But this is of course the mere beginning
of the Banks’ spending bonanza.
So we are now starting the acceleration phase of
rising deficits, falling
currencies and rising inflation leading to a hyperinflationary depression.
This is a vicious circle that will not stop until we have seen the “final
and total catastrophe of the currency system involved” (von Mises). The big difference this time is that it will
involve most major nations. This is unprecedented in world history and the
consequences will be difficult to predict accurately. What is certain is that
it will be a very different world than the false, debt enhanced and decadent
system that we have experienced in the last few decades.
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