Money, Gold, Liberty In 2015 And Beyond

by Claudio Grass, Gold Silver Worlds 2014 was quite an eventful year for global markets: Janet Yellen became the new Chairman of the Federal Reserve; we were on the brink of war in Crimea, and Germany won its fourth world cup title. Many countries around the world held elections, the Scotts and the Swiss had referendums and both of them decided to maintain the status quo, whether it was against Scottish independence or the Gold initiative. I wouldn’t describe this year as a tough one for gold, considering that it is ending the year close to where it left off end-2013. While some may perceive this negatively and against the rationale for holding physical gold, I find it more relevant than ever, like I said last year. The main reason why gold did not move against the tide this year is, in my opinion, because appearances have a stronger influence on the minds of the people than the facts presented by reality. The global debt situation is much worse than a few years ago and real economic growth is near zero. Income inequality is rising faster than ever before. The Federal Reserve’s balance sheet expanded from about USD890 billion to more than USD4.5 trillion since end-2007 and the only outcome so far has been an artificial spike in different asset classes and an expansion of the welfare-warfare state. The fact is that a fiat-money system always results in massive centralization, in terms of the economic landscape, “wealth-accumulation” and an ever-expanding state apparatus. The accumulation of debt is part and parcel of this mechanism. No necessary reforms or structural changes have taken place, which would allow a more positive outlook for 2015. More and more people feel that something is going completely wrong because they understand that it is not possible to fight over-indebtedness by piling up even more and more debt. The majority of the public, I believe, understands they need to sacrifice the present for the future. However, they suppress their conclusion. Most of them want to believe in a miracle and live in the hope that only the others will be affected by the negative consequences of today’s system, which my friend Prof. Dr. Thorsten Polleit calls a system of “collective corruption”. Men refuse to think about the rational outcome of our unsustainable system and prefer to believe in the lie they have been told a hundred times rather than a new truth which is based on the facts. However, we can’t hide from the future or as Herbert Stein used to say: “if something cannot go on forever, it will stop”. The Soviet Union did not collapse because their citizens finally changed their minds and opposed communism; the USSR collapsed because it could no longer be funded. The only achievement since the global financial crisis is that central banks purchased time financed by “money” that we simply don’t have. According to the Bank of International Settlements, total non-financial debt in advanced economies rose by 37 percentage points to 279% of GDP since the global financial crisis! Even emerging markets, which managed to somehow resist the pileup of debt in the past, have now reached a debt level of 157% of GDP. Instead of cutting the cord and putting an end to this dependence on additional credit, the western economies seek to solve their problems by printing more money and accumulating more debt! Mario Draghi believes that the way out is for the ECB to buy corporate bonds and asset-backed securities amongst other assets, dreaming of increasing the ECB balance sheet by EUR 1 trillion to reach around EUR 3 trillion! Also Japan, which has been in a QE mindset for years plans to address any prospect of a recession with even more asset purchases! How valuable can money be if all central banks just want to print more of it? Money is no longer a property title, instead it became an I-owe-something, the Dollar and every other paper money we hold today are simply IOUs. Due to this debt-based system, we need more and more money so that the system does not collapse, because as we all know, loans need to be repaid with interest. This constant increase in the money supply reduces its purchasing power. As long as governments and central banks can redistribute wealth from the middle class, they will continue to do so – the outcome of which will be impoverishment on a wide scale and the destruction of our society. Let’s have a closer look on what has been going on in the physical gold market. Physical demand is very strong and the refineries are again working 24 hours straight to meet demand but mining supply as well as scrap gold seems to be tightening. The Swiss Customs released import/export data showing another strong month of gold exports in November. Exports totaled 232 tons, stronger than the already good month of October with 200.8 tons. India was the main export destination with 77 tons, followed by 34.7 tons to China, 34.2 tons to Hong Kong, 22.8 tons to Turkey and 16.4 tons to Singapore. The Gold Offered Forward Rate (GOFO) has recently turned negative. When the GOFO rate becomes negative, it implies that the demand for physical gold in the spot market is high and market participants are willing to pay a premium to get immediate delivery of gold. The last time we saw such a development was back in 2009 when we witnessed a substantial increase in gold prices for several years. So, in this situation particularly with a shortening in the physical supply, we just don’t feel that comfortable about the future. Paper money destroys the values allowing us to coexist peacefully With low or even negative interest rates associated with the debasement of the purchasing power of money itself, every saver appears to be a fool. This process has a strong impact on us, because saving does not make sense and therefore people end up buying things they don’t need or they even can’t afford. This imbalance in which consumption and debt carry bigger weight compared to savings leads to the moral degeneration of society. Excessive consumerism stands for absolute contemporary fixation – a devil-may-care attitude. Because money becomes worth less and less, people start running after yields to compensate for the loss of purchasing power. The ways we think and act adjust according to our short-term problems and goals, ignoring the long-term ramifications. I believe that as a result of this, we lack time to reflect, to discuss, to care for the family but also to think about the values and ideals of our society. State activism and an inflationary monetary system are destroying our understanding of a “traditional family”. It loosens the ties between parents, reduces the attraction to bring children into the world and particularly to rear children in the best proper way so as to pass on these values to future generations. It is therefore that I firmly believe that state activism undermines the respect for all non-state authorities and is therefore destructive to our cultural and traditional values. Wilhelm Röpke, a German economist, once said in this regards, that “Self-discipline, a sense of justice, honesty, fairness, chivalry, moderation, public spirit, respect for human dignity, firm ethical norms — all of these are things which people must possess before they go to market and compete with each other. These are the indispensable supports which preserve both market and competition from degeneration.” Continue Reading>>>

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