The End of the Dollar and All Fiat Currencies 23 comments
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Dr. Antal Fekete published an article recently entitled "Red Alert: Gold Backdwardation!!!" "Backwardation" means that gold to be delivered today is now being priced higher than metal to be delivered later in the COMEX futures market in New York City. Why does this occur? It's because buyers of future contracts do not believe that the metal will be available later.
With other commodities, like base metals or grain, backwardation is usually immediately arbitraged out with those holding excess physical supply. The paper market in gold (and silver, which has been in backwardation for awhile) will eventually fail as new gold supply on the market is exhausted. Central banks selling even more of their gold is probably suicide; the traders will eventually eat them alive by purchasing the 100oz bars of gold and 1000oz bars of silver and selling them to the rabid investor market in these and smaller configurations. Fekete says this foretells the eventual collapse of the dollar and other fiat currencies, and as an avid Austrian student of economics, I agree with him.
The origins of contango and backwardation are simple; futures trading really started in mankind's first grain elevators. I recommend reading these Fekete articles "The Last Contango in Washington" (2006) and "Keeping Our Eyes Peeled for the Silver and Gold Basis" (2007) as well. Decide for yourself if you agree with Fekete and me (I am just a new novice, after all!).
"Trader Dan" Norcini in his charts here says to cool my jets; the month-to-month 100-oz gold bar contracts are not quite yet in backwardation, just very, very close, but I still agree with Dr. Fekete.
Fekete wrote:
According to the December 3rd Comex delivery report, there are 11,759 notices to take delivery. This represents 1.1759 million ounces of gold, while the Comex-approved warehouses hold 2.9 million ounces. Thus 40% of the total amount will have to be delivered by December 31st. Since not all the gold in the warehouses is available for delivery, Comex supply of gold falls far short of the demand at present rates. Futures markets in gold are breaking down. Paper gold is progressively being discredited...
Of course, it is too early to say whether gold has gone to permanent backwardation, or whether the condition will rectify itself (it probably will). Be that as it may, it does not matter. The fact that it has happened is the coup de grace for the regime of irredeemable currency. It will bleed to death, maybe rather slowly, even if no other hits, blows, or shocks are dealt to the system...
Gold going to permanent backwardation means that gold is no longer for sale at any price, whether it is quoted in dollars, yens, euros, or Swiss francs. The situation is exactly the same as it has been for years: gold is not for sale at any price quoted in Zimbabwe currency, however high the quote is. To put it differently, all offers to sell gold are being withdrawn, whether it concerns newly mined gold, scrap gold, bullion gold or coined gold. I dubbed this event that has cast its long shadow forward for many a year, the last contango in Washington, contango being the name for the condition opposite to backwardation (namely, that of a positive basis), and Washington being the city where the Paper-mill of the Potomac, the Federal Reserve Board, is located. This is a tongue-in-cheek way of saying that the jig in Washington is up. The music has stopped on the players of musical chairs'. Those who have no gold in hand are out of luck. They won't get it now through the regular channels. If they want it, they will have to go to the black market.
Fekete is forecasting the death of gold and silver markets at the COMEX (affectionately nicknamed the CRIMEX). As I wrote in "My Prophecy - The Federal Reserve Will End! A Money Matrix Addendum", this is a fight that precious metal expert Jim Sinclair has been raising the rallying cry to the banners of free markets for quite some time. Just like the break-up of the gold standard in 1914, the crumbling of the gold-exchange standard* set by the Genoa Conference of 1922, in the late 1920s (British pound sterling) and the Great American Gold Theft by FDR in 1933, the fall of the London Gold Pool in 1968, and Nixon's closing of the gold window in 1971, the fight to destroy the COMEX is a major battle in what Ferdinand Lips, ex-Rothschild banker, aptly called Gold Wars in his 2001 book before he died.
[*An aside. Understanding the difference between the gold standard and gold-exchange standard is critical to understanding the Great Depression. Ben Bernanke and Lawrence Summers (newly named to the Obama team) either do not understand, or intentionally mislead others, in their writings. In brief, the gold standard involved the use of gold and silver as currencies - you bought and sold all goods and services in terms of a certain weight of gold or silver, even if you used paper money that was a receipt for the metal.
The need for governments to slaughter their own armies (oh, and those of enemy governments) and finance WWI ended the gold standard in 1914. Starting in 1922, the gold-exchange standard took two currencies - the British pound sterling (which previously WAS a pound of sterling silver) and the American dollar - and pretended they were fully exchangeable for gold. All other world currencies were then pegged and constantly revalued against these currencies. However, the FED and Bank of England massively expanded their money supply (classic Austrian inflation) without buying gold and silver to back the currency during the 1920s. They tried to pretend their currency was backed by metal, and when this fraud was revealed, it ended the gold-exchange standard.]
When the price of gold finally skyrockets, the State, of course, will most likely crack down, blame, and seek to suppress the gold "speculators." However, it is important to note that actually what will occur is NOT the price of gold skyrocketing. The grams of gold one holds in their pocket before and after this event will not change at all. Same with the dollars you own. What is actually occurring is the PLUMMET in the value of exchange of the dollar and other fiat currencies for goods and services .
For those who do not understand what I mean by this, take a look at the chart of oil priced in dollars and goldgrams on a base 100 scale from this James Turk article from 2005. Turk is the founder of goldmoney.com and the graph seeks to show relative stability of "goldgrams" as a commodity currency vs. the dollar currency in terms of oil, a key commodity. Bottom line is that even though it was delayed for a decade by market manipulation, gold, the canary in the coal mine of the world economy, will finally start sounding for all to hear.
Gold and silver, the natural and free currencies of mankind, will win the Gold War against the fiat currencies of corrupt governments. Historically speaking, supporters of Gold are undefeated. Gold has always won each battle against the users of Fiat, although pesky governments, wars, and lies have had the upper hand from time to time. No fiat currency has survived from the 19th century through the 20th century, and no fiat from the 20th will survive the beginning years of the 21st.
The latest attempt by the American corporatocracy over the past 100 years has been the most determined ever. They have tried to blank out the memory of gold from all of us, in a fit of mass brainwashing. [Of course, by writing this, part of the reason is to prove that they missed one.] Truly, it is always darkest before the dawn. Even if Fiat currencies manage to survive through 2009, through 2015, even (as unbelievable as it seems to me, but I have learned to never underestimate the FED) through the next decade, the seeds of victory for Gold have been planted and will crush or slowly suffocate Fiat.
Of course, after the worship of Fiat is brought to a nasty, brutal end, governments and central bankers will scramble to control Gold itself, whether it's FED Gold Certificates, the wicked Amero, the theft of private gold, or some other form of nonsense. For a brief moment, the world will rest on a tipping point. If it falls on the side of freedom, this will be a time to rejoice. If it falls on the side of the corporatocracy, the setback will only be temporary, but I believe it will herald a period of warring states. If you thought the Iraq and Afghanistan Wars are horrible, you will be shocked at what comes next. However, no matter. It may take a few more generations, but honest money will one day win out.
For the past 300 years or so, defenders of liberty in Western society have fought to win the separation between church and state, which still remains an American ideal based on the inherent human liberty & privilege protected by the First Amendment.
The next struggle has been well underway, some would even say from the dawn of the American republic (ie Hamilton) to separate the state from meddling in economics, trade, and business. This lack of separation has always been there, but the truth of our command economy was finally revealed to even the most clueless American this fall.
It is your author's hope that separation between the economy and the state will one day be as widespread and commonplace as the separation between church and state (which could certainly be improved too!). Will rallying cries of "Gold is Money!" and shouts for the honest, sound currencies of gold and silver once more be heard in our country?
I also looked at this issue from a US Treasury-based perspective here "The Next Bubble to Pop!"
That reminds me of one last quote:
"Gold Is Money, and Nothing Else." - JP Morgan, testifying under oath to Congress before the Pujo Commission, 1913.
My fellow Americans, I do believe the time remaining to own gold and silver so cheaply is running out.
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On Dec 08 12:21 PM sorgmot wrote:
> This very nice article helps the reader understand more about gold
> pricing and gold trading.
>
> One should study the so called long cycles which are described in
> this Jake Towne report to get an idea of where we are and where we
> are going. Then take a global view of plant Earth and its parts.
>
>
> In many reports we have USA and other considered and compared. Now,we
> are slowly taking the view that the other is 3, 4 or more times bigger
> than the USA. Perhaps other is going the start calling the tune that
> we all dance to.
>
> Yes, the new center pole of Earth's finance and goods and services
> creation and consumption is the Euro-Asian land mass and appendages.
> What does that mean? First it means that we never use the term economiies
> again except to denigrate that term. Use wealth of nations, please,
> as did Adam Smith as it is measeurable in money which maters. Leave
> the cult of economists to yammer on about nothing as they have for
> generatiions of disservice to the people.
>
> Now, to the USA situation as 2008 ends. The decline of USA interest
> rates from 1980 to 2008 is slowly playing out as 2009 begins. In
> the USA, interest rates on USA $'s rewarded real asset buyers who
> used borrowed USA dollars to build houses, businesses, buildings,
> transportation equipment, and etc. As tnterest rates continued to
> fall, capital gains were made and more real assets were built using
> ever higher ratios of borrowed money in proportion to cost until
> the borrow to cost ratio got to 1.0 or even higher.
>
> When the interest rates ( real one which means interest rate less
> inflationrate) went below zero, and the FRB raised interest rates
> in 2007,everything financial went to pieces where ever USA $ were
> used. Buyers disapeeared, asset purchases ended, asset prices took
> a nose dive. Becausee debt ratios owed on assets was over 90% in
> a huge portion of real and paper assets, payments on existing loans
> ended putting leanders into bankruuuptcy.
>
> Once buyers could not borrow and could not keep paying on debts owed
> the USA and many other countries experienced sales declins and business
> and personal financial losses reported while tax receits, jobs, new
> contruction and etc. well.
>
> And so here we are. Will this ship be easy to turn around? No. Profits
> turn to losses, companies fail, jobs are lost, and etc. And it continues
> and accelerates because debt ratios to asset values are now over
> 1.0. Asset writeoffs rule the day. Atempts to sell and pay the creditor
> drive down prices of all assets. Can government bail outs work. No,
> they make the wealth of the nation decline by putting more taxpayer
> assets into the trash heap. The essence of government is waste and
> always will it be so.
>
> As 2009 begins. gold is being sold on balance to try to save assets
> from forclosure. This will end when people reelize that the ongoing
> loss of asset value is endless and one should give them to the creditors.
> Then, they will put the gold in their pockets and walk away.
>
> As loans fail, money supply declines and so does the economy. The
> money supply declines as loans go to zero value.
>
> Do we see a role for gold as the money supply starts a free fall?
>
>
> Good Luck.
Hell, I am an American, I love this country (USA), gave 40 years of my life serving her. I would love for the $USD to be the strong currency it SHOULD be, but those GEB's (greedy elitist bastards) will NOT allow it to be. They rather DESTROY it just so they can fill their own pockets.
Those of you who can't get your arms (and minds) around the fact that the almighty dollar is going the way of ALL fiat currencies of past nations, just read history! If you still don't get it. My sympathy is waning. Just go away!
Interesting article dated Dec 1, here > halturnershow.blogspot.../
You have to scroll down to the actual published date to view it.
Wherein the blogger, Hal Turner, who also has a radio show, claims not only has over 800 billion of the "new currency" been printed, but already shipped to China, since obviously the Chinese are getting "nervous" with all those T-Bills and T-Bonds, and the "coming Amero" will ease their concerns. He's even showing photo jpgs of the Amero coins and paper currency, each denomination representing USA, another for Canada, and one for Mexico, etc. -- the planned currency for the coming North American Union, merging the three countries into one, he says. Actually the deer on the Canadian $50A bill looks like one caught in auto headlights -- sorta funny.
He claims that the US Mint has had to scale back on public walk throughs of the mint, while the new funny money is being printed and minted so as to conceal what's really going on --"all designed to exhaust the Dollar as currency." His U-tube video has drawn over 6 million viewers, which reveals what the minted coin looks like. before Google removed it, claims Turner, who adds it was done so by the Treas Dept because "my video was "destabilizing the U.S. Dollar and was thus a threat to national security." But anyway, he still publishes the photos on his web site, but no vid.
So, while bloggers bemoan the rise or fall of gold and silver, the stock market, the recession, a possible depression, wars and rumors of wars, et al, here is another viewpoint on things behind the scene. Is it a wake-up call? Who knows.
Is it real, or can it be debunked? Anyway, its worth a read by going to the link, and decide for yourself. Pretty scary scenrio, in any event. Several other sites also are giving varying explanations on the "Amero," just Google it and look for yourself.
First thing that comes to my mind, is if the dollar is replaced by a new currency, knocked down by 90% - then what else gets "depreciated?" Car loans, mortgages? The price of a new car? And all the other trappings, from fuel cost, groceries, hard and soft goods, SS, health care, Medicare, i썐nsurance - the list is endless.
Will labor rates drop 90%? Including minimum wage? What will be the "balance" to offset - everything adjusts accordingly? Which means for every $100 you own, its now worth just 10 bucks?
And the real scary part, it can all happen in miliseconds, by electronic notification to all banks, demonitizing the Fed Note, replacing it with the "Amero" , he says,- and then any cash in hand has to be turned in for 10 cents on the dollar? Otherwise, it becomes like Zimbabwee toilet paper?
Maybe there's something to all this, since all one has to do is look at the monthly "burn rate" of billions by the govt, the bailouts, and the ongoing ones, plus what the FED has been loaning out as well.Then again, if all this is just bunk, somebody has done a great job showing jpgs of the "planned" new currency, published on his site.
Time to grab up a chair, sit on the sidelines on this one, and watch......before this blogger makes further comment on this subject....maybe for the moment call it, --- TOO Close to call. Your thoughts on this?
DeBunker
Heh. You have ALOT to learn, my friend!! There IS no separation of church and state...it is only religious values that make democracy possible, as our Founders knew and expounded. Freedom does not mean license, it means you are able to place limits on yourself, i.e. self control & doing the right thing, instead of having to have others do so!!
"...separation between church and state...an American ideal based on the inherent human liberty & privilege..."
What?? Read "it" again: "...we are endowed by our CREATOR with certain inalienable rights, that among these are life, liberty, and the pursuit of happiness." Now go back and check your history books -- who have been the worst fascists & genocists, and who did they first go kill? Invariably, they go after religious leaders and religious people -- because those are the people who hold up the values of human dignity and respect the loudest in times of disregard for them. Look back at the Nazi era for examples of this.
And on the flip side, look at how Karol Wojtyla (later John Paul II) during his time as Cardinal of Krakow stood up to the Soviets and bolstered the Solidarity movement in Poland -- it was that recognition that they could not defeat the Polish peoples' deeply held religious beliefs in the dignity of the human person and in the dignity of human labor, that led to the end of the Soviet era in Poland and then the entire bloc in Eastern Europe!!
True religions (as opposed to cultish sects) do not take one's rights away or hobble the mind! They FREE one by preaching the moral truths that we need to adopt in order to accomplish self-mastery...which is the only way to be truly free...as opposed to enslaved by lack of self-control, addiction, or enslavement by being governed by authoritarians! Our founders new this...they came to the new land exactly for the purpose of religious freedom -- so they COULD practice. They were being persecuted in England...told what beliefs to conform to and how to practice. That's what's happening now: religious people are being forced almost into hiding by your misguided atheist notions, which lead only to Marxist servitude of the people to a machine that adminsters what values we all ought to believe!! Is this not self-evident by the overregulatory society that we are now living in???
The problem is, of course, that almost every form of investible gold is nothing more than a piece of paper itself. Whether it's a piece of paper from the Perth Mint saying you own such-and-such or a certificate from GLD saying you have xyz gold backing. Any of which can be seized by a government in a heartbeat. So apart from buying physical and burying it in the garden (I don't have one) what can we do?
Any good ideas?
- Apartments and houses and gardens can be broken into and searched, even scanned by fancy equipment.
- Safe deposit boxes can be attached by the government. Same with HSBC allocated accounts.
- Perth Mint certificates are kinda nifty, but a claim on another continent.
- Royal Canadian Mint is at least on this continent... but is an unallocated account, and who knows what Canada will do in all this?
- Turk's Goldmoney, Anglo Far East, Kitco unallocated pool... they are all private companies whose word (and existence) you're simply trusting.
So, what is the best way to hold gold? A burning question!
- He advocated gov't intervention in the economy.
- On the other hand, he did invent the U.S. Treasury bond (as a viable instrument) which has aided trade and capitalization in America and the world, for over 2 centuries.
I'm short the dollar index here tonight and expecting to see it hammered down into year-end before the next decent bounce. Minimum target is the 80 level into year-end but a break of the 2008 lows is also coming as HE bails out the entire planet on OUR dime.
Big fireworks coming on the short-side in the AUDNZD and that's where my most aggressive position is going to be over the coming weeks so you guys might want to check that out if you're so inclined.
Big-P
Good places for the rest of your money: places no one would look and no one but you could know about. You have to take a bit of a risk here, because you will very often be storing your money on public property. Basically find places well off roads, railroads, rivers, and trails that are not well-traveled. Pick some geologically stable landmarks (using GPS is fine but always have a backup because the government can turn that system off or render it unusable) and carefully record the location of your money. It could be buried or stuffed in a tree or in a cave, etc. Obviously this sort of thing works best in rocky areas and in deserts away from washes and ravines where erosion isn't a problem.
You probably want to place (and retrieve) your money during the day. Although you're an easy target for satellite observation, you're an even easier target at night unless the target area is heavily wooded and you aren't using a vehicle; vehicles and humans are both easy to observe in the infrared and night hiking is rare enough that it would attract attention.
So really you are hiding your wealth in plain view. Remember Willie Sutton's rationale: he robbed banks because that's where the money is. If you want to keep your money, be sure it's not where people will look for it.
Hate to say it folks, but I agree with the person who suggests buying a diverisifed portfolio of assets. That is all. Go ahead and tell me to read/study history, suggest that I'll surely be standing in the breadlines with the masses, threaten that I'll be enslaved... when "all this paper" becomes worthless. If you're right, you're right; meanwhile, I'll continue to act like a reasonable adult.
Just to put it in perspective some poster here gave about 10 rules and idea about how to hide gold(money). And the pros/cons to retrieving the gold(money) during the day versus the night because people might be "watching" you.
Irrational. Just like ladders11 said, if gold bugs are right(they also see an immenent end of the world and deep depression, not sure why they even stick around on Earth), they are right and the rational people will deal with such a terrible situation when it comes. Preparing for that would be a waste. Having gold at that time would make you a target not some type of clairvoyent winner.
I often wonder if conspiracy theorists main drive is to one day tell people "I told you so". If that is it, I hope they realize most people won't care at that point.
Given those facts, we can only assume that the market price of the dollar will at some future time - after the present short squeeze ends - catch up to the intrinsic value. If you don't believe this, I would really like to know what kind of assets you recommend, because if the markets for those assets can remain irrational forever there is not much point in investing or in fact in holding anything even as a store of value (which also means you have no units in which to measure your returns, making any investment doubly pointless). Nevertheless, for the dollar to go to zero, one of two things would have to happen: US output falls to zero, or no one producing that output is willing to accept them. The former is certain if we are looking at tens or hundreds of millions of years but on a century scale it seems unlikely. The latter is actually much more likely - the notional value of a currency needn't be zero for it to be completely unacceptable for commerce so long as that value is falling rapidly or unpredictably enough - but would almost certainly be counterbalanced temporarily by extreme brutality applied by the military in an ultimately failing effort to force people to accept the unwanted paper even for debts that do not yet exist. No one can predict when this will happen; it could happen tomorrow, next year, or not for another 50,000 years. I'm not picking an over/under and I'm not laying odds. Pick a date you like and keep it to yourself because I really don't give a damn.
Fortunately, I don't have to. Being long the dollar right now is simply a momentum play. You are receiving no yield on your position. You are on the wrong side of the fundamental value proposition. And you are fighting the Fed. Shorting the dollar would cost me nothing. If I keep such a position small enough, I can be absolutely certain that I will profit if I am patient. But it's questionable whether it's worth the risk: it's probably better to just sit around with no positions waiting for equities - actual investments, which my gold is not - to bottom. Since most companies have dollar-denominated debts, all I have to do is wait for the dollar squeeze to end and I will find tremendous value in companies with lots of dollar debt and great businesses. As time passes, their debts will shrink and their earnings will remain steady or rise. And if they pay dividends, even in dollars, those dividends are nearly as good as gold because they are current income; I can sell those dollars very shortly after they are earned. This changes if the dollar starts losing a significant portion of its market price each day, but any rate of dollar decline up to perhaps 50% per year makes this a winning strategy. Since I give up nothing (except downside risk) to sit in gold, there is absolutely no reason to hold dollars. They fail both as a store of value (asymptotically approaching zero) and as an investment (no yield). Unless you think they look pretty or like chasing bubbles, you shouldn't own them. I don't need them to go to zero - ever - to be right about this.
Wow Maya, I actually think *everything* you said was wrong!
1. Since Bretton Woods, Gold has risen in value against fiat like crazy. Look up some charts if you don't believe me.
2. Gold, long term demand will continue to fall? Have you been living in a cave? The world financial crisis is only getting worse. Confidence in fiat is deminishing fast, gold is ever more in demand and will continue to do so until this all blows up and we start off on some new system (gold backed currency?).
3. A better financial hedge is NOT through a basket of commodities, because, havn't you heard, we are in a deflationary cycle and commodities have been hit hard. Until inflation is here again, all commodities will be a useless investment.
4. $ bears are not in for a surprise. As Obama hands out Trillions in bail-outs the dollar will go lower and lower. Printing more dollars against thin air deflates the value of the dollar, not the other way around.
5. Debt isn't going away when the printing presses are working in over drive, and even more so with Obama's bail-out-the-world nonesense. They will try to inflate the hell out of the system until either the dollar collapses/loses its reserve status due to too much unpayable debt, or they overshoot and hyperinflation occurs - either way the US of A is screwed in 5 years or less.
6. GDP ain't gonna increase when so much cheap labour is available in the BRICs (Brazil, Russia, India, China, etc). US of A outsourced manufacturing. The USA produces next to nothing now. If they export nothing, they PRODUCE nothing. Remember the "P" in GDP = Product. The USA has NO product. The GDP has only been increasing in the past couple of decades because of GDP definition manipulation combined with a debt based economy backed up by a reserve currency.All of that is about to change. The land of the free is about to become the land of the poor.
7. Obama will likely reduce the deficit? ARe completely stupid or just can't read the 50 bazillion headlines that says he will spend spend spend to create 2.5 million jobs? Every dollar he spends, is a dollar that has to come from somewhere, since the USA is basically insolvent, that dollar is coming from either debt (money borrowed from SWF's) or from taxes on future US generations. Either way, that is an INCREASE in the debt, no the other way around.
8. Expecations of a falling deficit will not take place until the debt is forgiven by other nations which means the US would default on its debt. I don't think it will get that bad. More than likely it will be like Japan of the 1990's. Stagflation for 10 to 20 years, as 2 or 3 USA generations try to pay back for all the nonesense bail-outs.
Seriously, I have never read a commentary more wrong than yours. Please get your head checked... TWICE!
Adeptus
On Dec 09 10:56 AM Maya_ wrote:
> Since Bretton Woods, gold serves no purpose. It is not really a store
> of value because its long term demand will continue to fall. Biggest
> demand is from India and that is eroding due to alternative investments
> gaining popularity. It works as a financial hedge and might stay
> strong a year or two, but a better financial hedge would be through
> a basket of commodities (at least metals, oil, chemicals etc are
> of productive use). I think the $ bears are in for a surprise. US
> deficits will likely rise for a year to year and a half, but after
> that two things will happen; GDP will rise faster than debt, which
> will reduce real debt as a % of GDP. In addition, it is likely that
> Obama will aggressively reduce the deficit. Once expectations of
> a falling deficit set in, gold is dead. Its not long.