We have entered the endgame for the dollar as the dominant reserve currency and most investors and policy makers are unaware of the implications – but those who are will have positioned themselves in the one asset most likely to be left standing when the dust settles – gold. Here’s why.
The original article, written by John Hathaway, is presented here by munKNEE.com – “ The internet’s most unique site for financial articles! (Here’s why)” – in an edited ([ ]) and revised (…) format to provide a fast & easy read. Visit our Facebook page for all the latest – and best – financial articles!
The only questions now are:
1. how long will the denouement of the dollar reserve system last and
2. how much more damage will be inflicted by new rounds of quantitative easing and/or more radical monetary measures to prop up the system.
Whether prolonged or sudden, the transition to a stable monetary system will become possible only when the shortcomings of the status quo become unbearable. Such a transition is, by definition, nonlinear [and, as such,] central-bank soothsaying based on the extrapolation of historical data and the repetition of conventional wisdom offers no guidance on what lies ahead.
It is amazing that there is no intelligent discourse among policy leaders on the subject of monetary rot and its implications for the future economic and political landscape. Until there is fundamental monetary reform on an international scale, most economic forecasts aren’t worth the paper on which they are written…
Monetary Policy Has Painted Itself Into A Corner
The consensus investment view seems to be that the credit crisis of 2008 was a freak occurrence, unlikely to repeat. That is wishful thinking. Based on our present course, there will be more bubbles and more monetary meltdowns.
Financial markets and institutions sense trouble, as reflected in the flight to supposedly safe assets such as Treasuries and corporate-debt instruments with paltry yields as well as the reluctance to lend by commercial banks. We are stuck in an epic liquidity trap. The irony is, if global central banks succeed in creating inflation, the value of these safe assets will be destroyed. It is a slaughter waiting to happen.
In the pedantic mentality of central bankers, their playbook creates just the right amount of inflation. As inflation accelerates, consumers will spend to get rid of their dollars of diminishing value and spur the economy. Once consumers start spending, it will be time to raise interest rates because a solid foundation for prosperity will have been established, they say. Whatever the playbook promises, [however,] the capacity of financial markets to overshoot can’t be overestimated. The belief among policy makers and financial markets in the possibility of this sort of fine-tuning is preposterous, but it is the slender thread on which remaining investment and business confidence rests.
Breakdown of Monetary System Will Be Chaotic and Gold Will Be the Place to Be
When inflation commences, it will be highly disruptive.
- The damage to fixed-income assets will seem instantaneous.
- Foreign-exchange markets will become dysfunctional.
- The economy will become even more fragile and unpredictable.
Gold is an imperfect but comparatively reliable market gauge for the extent of current and future monetary destruction…The Fed is organizing an attack on the dollar’s value, believing that this is the most expedient way to defuse deflationary market forces. The man in the street is unaware which is a perfect setup because inflation can only be successful when the public doesn’t see it coming.
The…one asset most likely to be left standing when the dust settles is gold.
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