REAL Money vs. Paper Money

Dramatic Spike In Fund Flows Into The Gold ETF GLD And A Major Warning On The U.S. Dollar

For 180 years, it was said the dollar was ‘as good as gold.’ In fact, it was as good as gold; U.S. government creditors could convert their dollars to U.S. gold. The currency was 100% convertible to gold in foreign exchange from 1792 (President George Washington) until the dollar’s tie to gold was severed completely on August 15, 1971 (President Richard Nixon).

The colossal decision to remove the discipline of gold from the dollar was called the “NIXON SHOCK.” Overnight, the dollar was a “fiat” currency (backed by nothing tangible).

Although Nixon killed the gold standard,
the monetary role of gold did not die.

Gold is timeless money. Its sole purpose is to store value. All currencies are constantly measured against the timeless value of this monetary metal. According to the former Board Chairman of the Federal Reserve, the dollar is no match for “the golden measuring rod:”

“Yes. Remember what we’re looking at. Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it.” (Address by Alan Greenspan to the Council on Foreign Relations, Oct. 29, 2014, Gillian Tett, “Financial Times” of London.)


MEASURING THE VALUE OF ONE DOLLAR:

Gold Coins

  • From 1792 to 1933, 1 HEAVY dollar was equivalent to 1/20th of a 1-oz gold coin.

  • From 1934 to 1971, 1 LIGHT dollar was equivalent to 1/35th of 1 oz of gold.

  • On the day credit collapsed worldwide (August 9, 2007), 1 FIAT dollar equaled 1/662nd of 1 gold oz.

  • On March 14, 2008, the dollar fell below 1/1,000th of 1 0unce.

  •  One dollar now equals 1/1,772nd of a 1-oz gold coin (as of 6/27/2020).

YOUR MONEY IS BLEEDING VALUE. 

Since the dollar was debauched in 1971, the currency is down 3,600% against gold (it now takes 36 times as many dollars to buy a 1-oz gold coin). On the day of the global credit-collapse (August 9, 2007), gold was $662/oz. Today, it takes more than twice as many dollars to buy the same gold coin. In only 13 years, the dollar has lost about half of its purchasing-power. 

2007 dollars had 2 times more strength (to buy food, housing); 1971 dollars could buy 36 times more goods and services; and 1933 dollars had 65 times more purchasing-power.

FAITH-BASED CURRENCIES

Before the dollar was delinked from silver and gold, its purchasing-power was inflated away systematically. Until 1971, ‘money-printing’ was restrained by the nation’s finite supply of gold. Today, the dollar-supply is unlimited.

Now that the dollar does not represent tangible value, the value of U.S. currency is derived from faith (confidence in the “full faith and credit” of government).

But according to monetary history, faith-based currencies (not backed by gold and/or silver) all end the same way. In the last stage, a sudden loss of confidence is the trigger that unleashes ferocious money velocity. That happened twice in U.S. history:

  • In 1776, Continental dollars were printed to finance the Revolution. When people realized the dollar was not backed by silver, panic ignited near-hyperinflation (47% inflation per month).** Congress redeemed the dollars at 1,000-to-1: 1 SILVER dollar equaled 1,000 PAPER dollars.
  • Congress created Greenback dollars to pay for the Civil War. When people lost confidence in the currency, they spent the money as fast as possible. Inflation peaked at 40% per month in 1864 (Greenback $1 fell to 35¢).**

Image result for 1923 us silver dollar

Germany’s booming stock market was the envy of Europe from 1920 to 1922.*** When market psychology reversed, confidence in the papiermark (ℳ) collapsed. In 1919, Germans paid 16 marks for U.S. silver dollars. By the 1923 German hyperinflation, 1 SILVER dollar was equivalent to 4.2 trillion arks.

When currency is backed by nothing, there are no limits to the supply of printing-press-money. As a currency’s value goes down, it takes more and more of the FUNNY MONEY to buy REAL MONEY. For example, it now takes millions of bolívares to buy gold in Venezuela. Last August (2018), 1 Venezuelan bolívar equaled 1/211 millionth of 1 oz of gold.*

FUNNY MONEY KEEPS THE SHIP AFLOAT.

  • On August 9, 2007, a single “credit event” (Banque BNP Paribas) sparked a worldwide credit-collapse. Within hours, the dollar was in free-fall; market liquidity evaporated; inter-bank lending locked up; and the international monetary system FROZE.

  • In 2008, Bear Stearns, Merrill Lynch, and Lehman Bros. collapsed; Washington Mutual Savings Bank was seized after a 9-day bank-run. WaMu was the largest-ever bank failure; the Dow Jones Industrial Average had the biggest-ever 1-day drop; Lehman was the largest-ever bankruptcy

  • The banking system came close to locking up again in Nov. 2011, Oct. 2014, and Aug. 2015. At the Ludwig von Mises Institute, Dr. Jürgen Stark, then Chief Economist for the European Central Bank, told the audience that the only thing keeping the global financial system going since 2008 is money-printing:

“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, then ECB Chief Economist, European Central Bank; mises.org)

PREPARE FOR VOLATILE “CREDIT EVENTS.”

Financial markets are inter-dependent. The next time markets seize up, loss of confidence in one major currency could trigger implementation of controls on cash and investments. You need portfolio insurance (from third-party risk). Physical gold and silver coins will give you liquidity under all market conditions. But if you don’t hold it, you don’t own it:

Get American Silver Eagles
(new 1-oz silver dollars).

Get American Gold Eagles
(new $50 1-oz gold coins).

Take delivery of GOLD & SILVER DOLLARS.
REAL MONEY stores value for your family.

END NOTES

Forbes: “Wait Until You See The Price of Gold In Venezuela Right Now,” by Frank Homes, August 6, 2018.

** Thomas E. Woods, Jr., “The Revolutionary War and the Destruction of the Continental,” Ludwig von Mises Institute Library, Mises.org, October 11, 2006.

** HYPERINFLATION is a rate of at least 50% per month. U.S. monthly inflation statistics from Professor Steve Hanke and Professor Alex Kwok, On the Measurement of Zimbabwe’s Hyperinflation, “The Cato Journal,” Vol. 29, No. 2, pp. 353 and 354, Spring-Summer 2009, The Cato Institute.

*** Professor Hans F. Sennholz, “Hyperinflation in Germany: 1914-1923,” Mises Daily Articles, Library of the Mises Institute, Mises.org, October 27, 2006.

*** Steven B. Webb, The Supply of Money and Reichsbank Financing of Government and Corporate Debt in Germany, 1919-1923, “The Journal of Economic History,” Vol. 44, No. 2, pp. 499-507, Cambridge University Press, June 1984.

Submitted by Denise Rhyne.

THE FUNDAMENTAL TRANSFORMATION OF AMERICA:
http://www.youshouldbuygold.com/the-fundamental-transformation-of-america/

World Currency Exchange Calculator

WHAT ARE CAPITAL CONTROLS?
http://www.youshouldbuygold.com/what-are-capital-controls/

WEIGHTS, MEASURES & BALANCING SCALES:
http://www.youshouldbuygold.com/weights-measures-and-balancing-scales/

TABLE of CONTENTS: Ancient Monetary System; CARAT Weights; KARAT Purity; TROY Weights; METRIC Weights; MILLESIMAL Fineness; FAR EAST Weights; POUND (Pound Sterling, Pennyweight, Sovereign); DOLLAR (Old Gold Coins); Historical GOLD-to-SILVER RATIOS (U.S. 90% Silver Coins, new American Eagles); BIBLE Weights: TALENT, MANEH, SHEKEL, GERAH, BEKAH (Table); WORLD COINS (Gold Contents).Click for a larger photo

GOLD IS A PRUDENT INVESTMENT:
http://www.youshouldbuygold.com/gold-is-a-prudent-investment/

Above: $5 Indian, $20 St. Gaudens, and $10 Indian ($1 was equivalent to a unit of gold weighing 0.048 oz or 23.22 grains). The official price of gold was fixed at $20.67/oz (1792); raised to $35 (Jan. 1934); raised to $38 (Dec. 1971); the final official price was raised to $42.22/oz (Feb. 12, 1973).

Beware Of The Dollar: The U.S. Ponzi Economy Is Malfunctioning.

Gold is the true SAFE-HAVEN currency. The dollar is ‘strong’ only when compared to more toxic currencies. Since the 2007 credit-collapse, the dollar has fallen 100% against gold. In other words, it now takes twice as many dollars to buy the same amount of gold.

On the day markets FROZE worldwide [Aug. 9, 2007], the price of gold was $662.60/oz [London p.m. fix]. It now takes twice as many dollars to buy the same Troy ounce of PHYSICAL gold. The price of gold is signaling declining confidence in the dollar-reserve system.

THE DAY LIQUIDITY EVAPORATED

It is generally acknowledged the current crisis in financial markets began with a liquidity freeze on August 9, 2007. France’s largest bank, Banque BNP Paribas, cited that date as “the day liquidity completely evaporated from certain segments of the U.S. securitisation market.”* Continue reading Beware Of The Dollar: The U.S. Ponzi Economy Is Malfunctioning.

The HYPER-CREDIT BOOM – BUST

Global financial markets are integrated and inter-dependent. The markets look ahead and trade on anticipation. It is now extremely bullish for gold!

Zero% Interest Rate Policy (ZIRP)

Since 2008 (for the first time in the history of the world), 90% of the developed countries have had 0% interest rates and a steady flow of “Quantitative Easing” (QE). A small number of “too-big-to-fail banks” [domestic and foreign] have been able to borrow from the Federal Reserve at or just above 0%. (For seven years, overnight/inter-bank lending was 0% to .25%. On Dec. 16, 2015, the nominal rate was raised to .25%; the maximum rate is now .50%).  Continue reading The HYPER-CREDIT BOOM – BUST

Dominoes From the Oil Crash Are Falling

  

We are witnessing a worldwide debt-crisis; and the collateral damage will affect U.S. markets.

 


We recently published “
Weimar: First DEFLATION Then INFLATION.” That is exactly what is underway — in slow motion and on a much bigger scale. The Japanese yen has plummeted and the Russian ruble lost almost 1/2 its value. Dominoes from the crash in oil are falling. Based on the volatility in the USA index, we believe we are in the middle of some sort of derivatives meltdown. The Euro has crashed to a level not seen since 2006.


While their currencies lost value, the Europeans, Russians and Japanese who held their savings in actual gold coins and bars lost NOTHING. In fact, the price of gold has gone up in those currencies.  That is why prudent investors have always kept 5% to 10% of their wealth in physical precious metals.

QE4 / ZIRP
Zero% Interest Rate Policy

The dollar is backed by nothing but confidence and debt.  The dollar seems strong because the yen and the Euro are weakening FASTER; but the true value of the dollar is declining.  Do not wait for the high-flying dollar to hit an “air pocket” when the Federal Reserve finds an excuse to announce QE4.  Fear can replace confidence when people realize artificially low interest rates are here to stay.

 

On Jan. 6, 2015, multi-billion dollar fund manager Bill Gross said:  “When the year is done, there will be minus signs in front of returns for many asset classes. The good times are over.”

Mr. Gross is now telling investors to batten down the hatches and protect their capital.

To us that means converting some of your “paper investments” to physical coins – for liquidity with no third-party risk. Gold has been the safest safe-haven for 6,000 years. During the coming economic upheaval, gold and silver will perform as “monetary metals” and the world’s only real money.

 By Denise Rhyne

Round Two Of The Financial Crisis Has Begun

October 2014. Global economies are contracting.  Prepare for giant swings in the stock market, trading halts in the bond market, and unprecedented money-printing.

Despite the endless propaganda, the economy of the United States is not recovering.  Leading economic indicators are turning down. That is why the Federal Reserve is continuing to suppress interest rates by printing money.


Markets are on fire. Trading halts and “flash-crashes” are coming with increasing regularity.  The stock and bond markets are trying to tell us something. Liquidity is becoming a problem.

Look at these out-takes from recent headlines:

Everything was Sold.
Oil is in a Virtual Free-Fall.
Low Liquidity Alert.
Spreads Blowing Out.
Algos Gone Wild!
Market Contagion.
Systemic Risk.
Market Depth Abysmal.
Markets Getting Scared.
Distressed Debt.
Prepare for Runs.
Examine all Risk Exposures.


GOLD IS A SAFE-HAVEN FROM THIRD-PARTY RISK.

Overnight, gold and silver prices will surprise everyone.

What is the #1 reason?  China is the new sheriff in town.  In 1980, China was a small player.  Today, China is the biggest gold buyer in the world.

 

Get silver.  Stay with silver.

Silver has become accepted as a reserve-asset and monetary reserve in Asia. China is now responsible for about one fifth of global silver demand.  In 2014, demand for silver in India was record-breaking (November gold demand was up 38%).

The affluence of buyers throughout Asia is now a significant market factor.  Since the beginning of 2014, the transfer of silver and gold bars from the West → to the East (primarily to China, Russia and India) has been unprecedented.

Preserve your nest-egg with 1 oz American
Eagles.  Real money means real liquidity.  

By Denise Rhyne

During the coming economic upheaval, gold and silver will perform as “monetary metals” and the world’s only real money. WEIMAR: First DEFLATION Then INFLATION (see what happened to the prices of gold and silver in Germany): http://www.youshouldbuygold.com/weimar-first-deflation-then-inflation/

WHAT ARE CAPITAL CONTROLS? http://www.youshouldbuygold.com/what-are-capital-controls/

Drastic Changes in Sentiment: Gold & Silver

Big changes are coming to financial markets.

 

The “economic recovery” painted by the news media is an illusion. At the Davos World Economic Forum, banking executive Axel Weber warned the world debt crisis is far worse now than in 2008:

“Things feel better than they are. The recovery too weak to generate jobs. It’s not about whether things are improving: the levels of growth, jobs, and GDP are way worse than before the crisis.”  (Weber was formerly with Bündesbank, the German central bank; from ZeroHedge Jan. 22, 2014)

The Dow Jones has been gyrating all over the place. Since October 2014, trading halts have become more and more regular. In August 2015, we saw signs of systemic liquidity distress. This is not normal… Dow futures moved over 4,500 points intraday today!!!

Deterioration in the global economy is accelerating. When the tipping-point is reached for global debt, fundamentals will take over all markets. Gold is firmly re-established among financial elites and nation-states as the safest, most liquid asset. Overnight, gold and silver coins will be extremely hard to find.

Buy PHYSICAL gold coins — (ETFs have counter-party risk, unlike actual coins and bars in your possession.) It is prudent to have 10% – 20% of your net worth in physical gold, silver and platinum. Diversification is critical.

By Denise Rhyne

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Call  (206) 719-6368

Capital controls can limit sales of securities, restrict what you can invest in: WHAT ARE CAPITAL CONTROLS? http://www.youshouldbuygold.com/what-are-capital-controls/

GOLD IS A PRUDENT INVESTMENT: http://www.youshouldbuygold.com/gold-is-a-prudent-investment/

Gold and silver are in short supply. I have not seen precious metals shortages like this in forty-four years. I shop dealers all over the country for bars and coins. All the dealers are experiencing the same thing… supplies of gold and silver are drying up. 

Economic Bubbles Cannot Go On Forever.

It is now six years since the 2007/2008 financial crisis. Today, many nations are bankrupt, many municipalities are broke, and millions of people are under water. However, that is just the tip of the iceberg. In order to paper over the fragile world banking system, central bank credit has created/ enabled/or financed more than one thousand trillion dollars of derivatives debt.


Few of us understand derivatives trading or how the highly leveraged market works. But we do know speculation in derivatives brought down the United States housing market.

According to the National Association of Securities Dealers: “Derivative is a generic term applied to a wide variety of financial instruments that derive their cash flows, and therefore their value, by reference to an underlying asset…”

Derivatives debt for the planet is estimated to be more than $1 quadrillion — $1,000,000,000,000,000.

The combined GDPs of the world are called the Gross World Product (GWP). In 2011, the total GWP was U.S. $70.16 trillion ($70,160,000,000,000).

There are 3 more zeros of derivatives debt than the combined value of all goods and services produced on earth.

Derivatives are financial instruments that derive their value “by reference to an underlying asset.”  What underlying assets could possibly give value to $1 quadrillion of debt?  

One trillion is one million million.
One trillion is 10 to the 12th power.

One quadrillion is one thousand million million.
One quadrillion is 10 to the 15th power

Picture three more zeros.

Picture a man who can earn $100,000 per year ($100 thousand). He makes $100,000, but he owes $100,000,000 ($100 million). No matter if the man lives in painful austerity, he will never be able to pay off the debt.

A few things are obvious when you look at the size of global derivatives debt:
1) We already have hyper-credit creation;
2) There is relatively very little real collateral underlying the debt;
3) The only way the debt can be repaid is by more hyper-credit creation;
4) Eventually, the highly leveraged debt will take down the entire global economy.

Can central banks inflate the quadrillion dollar bubble forever?
No. According to Stein’s Law (Herbert Stein)hyper-credit creation will stop: 

“If something cannot go on forever, it will stop.”

The climactic end of the dollar bubble is certain.  The derivatives debt of America’s too-big-to-fail financial institutions can never be repaid (without hyper-money-printing). Across the globe, there are more Lehmans, AIGs, MFGlobals, and Bear-Stearns now than there were in 2008. Just one collapse could ignite the fire of contagion. Banks’ exposure to derivatives debt will be crippling during subsequent market gyrations.    

By Denise Rhyne

The Invisible Tax

2011 estimates of derivatives exposure:  JPMorgan $70 Trillion; Bank of America $50 Trillion; Citibank $50 Trillion; Goldman Sachs $40 Trillion; HSBC $4 Trillion; Wells Fargo $3 Trillion; Bank of New York Mellon $1 Trillion; Morgan Stanley $1 Trillion; State Street Financial $1 Trillion.

WEIMAR: First DEFLATION Then INFLATION

Gold Market Crashed to Defend the Dollar

Shock & Awe in London and New York: In one day (April 12), more than 400 tons of PAPER gold were dumped on the market —to crash gold and to defend the dollar.

Something desperate is going on in the financial markets for
the Federal Reserve to coordinate this extraordinary “event.”