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Thursday, August 18, 2011

VASKO KOHLMAYER: WHAT HAPPENS WHEN THE GLOBAL MONEY STANDARD FALLS APART?

WASHINGTON, August 18, 2011 — We are living through an historic time: What is unfolding before our eyes is nothing less than the unravelling of the present world order.

The immediate cause of this unravelling is the disintegration of the world's reserve currency – the American dollar.

The American dollar is disintegrating because the American federal government has taken on too much debt. Excessive government debt almost always leads to currency destruction, because the profligate government invariably attempts to discharge its obligations by printing money.

Money printing may appear to be a clever way out, but it inflates the money supply and causes devaluation.

The US dollar has been in the process of devaluation for some time now. It has been steadily dropping against other currencies, and it has been sharply sliding against gold, the ultimate gauge of the dollar's health.

In January 2001, you could buy a troy ounce of gold bullion for $260. Today you have to pay nearly $1800 for that same ounce.

Things are only bound to get worse as the immense size of the American debt burden continues to squeeze the dollar. Because the US government cannot pay the debt, its weight will eventually break the greenback’s back.

Since the world’s financial system is based on the dollar, it will come crashing down once the dollar gives out. This will send the world into an economic depression of unseen proportions. Social breakdown will follow.

This process is already underway. The long-drawn recession and the rioting around the world are all part of it. We truly live in the twilight of the dollar-based financial regime.

Crushed by astronomical debts, the dollar's reign is coming to an end (Image via Wikimedia Commons)

 

What will emerge in its place is difficult to say. The natural tendency will be for real money – which is gold and silver – to become the means of exchange once again.

Government, however, will try to do everything in its power to prevent this from happening. Government does not want sound money, because it derives much of its power from currency manipulation.

Inflation is a means by which government enriches itself at the expense of the population. Unfortunately, most people are not aware of this. When inflation and financial instability hit they look to government for remedies. Most people do not realize that these ills are caused by government in the first place.

Almost all of the upheaval and turbulence we now see in the financial markets and throughout the economy are a result of government misconduct. Debts that cannot be repaid, unsustainably low interest rates and large infusions of easy fiat cash through repeated rounds of quantitative easing are all of the government's doing.

These policies are destroying the dollar and pushing the economy over the cliff. It is misguided to hope that the very thing which is responsible for the havoc will fix it. We must not look to the perpetrator for rescue. If we really wish to move forward, we must get him out of the way.

Unfortunately, there is no escaping the pain we will have to endure because of the missteps of the past. But if we let things run their natural course what will emerge will be far healthier and sound than this failing fiat money system.

As things are coming to a head, we will have a stark choice: We either honestly face the inescapable consequences of the fix we are in, or we seek a false sense of protection and safety in the arms of our government.

If we choose the former, we will go through a period of intense pain as the system purges that which is dishonest and unsustainable. The latter would give us a prolonged agony of misdirected government measures, each intended to remedy some problem caused by previous government intervention and each making the bad situation worse.

May we find the courage to make the right choice.

 

 

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Comments

BEWARE OF GOLD:

The five gold downturns since 1973 have averaged a 28% loss over an average 3 years. the two highest drops in gold were following the election of Ronald Reagan in 1980 and following the re-election of a Conservative Congress and Conservative Democrat President in 1996. So the prospect of conservative leadership and corresponding fiscal restraint will trigger the next gold downturn which, if it occurred today, would drop the price of gold to about $1,300 per ounce.

Bottom line; if your bought gold for over $1300 per ounce, you’d better be watching congress and selling your gold immediately before they pass a balanced budget amendment.

Lynn Bergman on August 22, 2011 at 06:39 pm
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