By Ken Jorgustin
The United States has been fully off the gold standard for 44 years. Depending on where you read statistics, the average life expectancy of Fiat currencies are somewhere between 27 and 39 years. Fiat economies ALWAYS collapse.
The thing is…
The U.S. Dollar is on life support, and the world is about to pull the plug…
The American economic system is seemingly in the last throws of its current form.
The dollar began to come off the gold standard in 1933 when the ‘Bretton Woods Agreements’ fixed the currency exchange rates for many countries to be relative to the dollar. Although central banks could exchange dollar holdings into gold at the official exchange rate of $35 per ounce, this option was not available to firms or individuals.
The gold standard link was completely severed in 1971 when Richard Nixon ended international convertibility of the U.S. dollar to gold.
Since then, the dollar currency has been essentially linked to oil, and is commonly referred to as the ‘petrodollar’. Its value has been protected and held together by wars which have enforced oil’s convertibility to dollars prior to any foreign sale.
The status of the petrodollar however has dramatically changed in recent years while Russia, China, and others are now trading for oil outside of the U.S. dollar while Saudi Arabia remains the last major link to break from the petrodollar. In fact, King Salman and Putin have been talking lately – and I would speculate that they’re talking about more than just ISIS…
The petrodollar is becoming obsolete and is only holding on by a thread – while being further pressured due to the low price of oil (due in part to lower demand via a failing consumption economy that has reached ‘peak debt’).
For those who have been paying attention, you know that China has been quietly gobbling up all of the worlds gold production each year. I mean, all of it (world production in the neighborhood of 2800 tons). You might (logically) ask, “If China is consuming all of the equivalent annual gold production, where has the rest of the world been getting their gold from during these years?” The numbers don’t add up. And the ONLY (logical) answer is that gold has been being delivered from the Western vaults to the East. And many who have been tracking this believe that there’s very little gold left in the West.
You might ask, “Why would the West allow its gold to be delivered to the East?” The reason: Since (currently) gold fiat prices are set by ‘the West’, and since they have been held VERY artificially low (via ‘short’ positions by a few .gov ‘select’ major banks coupled with the .gov ‘PPT’ plunge-protection-team and the ‘fixed’ daily London price ‘fix’) since the 2008 ‘crisis’, China (and others) know the end game – and they are preparing for it by gobbling up as much as they can while there is a ‘fire sale’ going on.
Why has the gold price been held so low? Because if the fiat price of gold is allowed to rise to its natural level, it will reflect the truth of the broken fiat system.
Will ‘they’ always be able to keep the price artificially low? No. It will all end (very badly) when the Comex can no longer deliver.
Not long ago while exploring the current situation regarding gold delivery, I read on ‘Investment Research Dynamics’, “The amount of “deliverable” gold on the Comex is the lowest that I’ve seen it in the time I’ve been following the Comex data avidly since 2002”.
Comex is nothing more than a pure paper gold market. The latest disclosure from the CME is that the ratio of paper gold vs. the amount of deliverable ounces has spiked to over 200:1. It’s nearly 100% derivatives. It’s the imposition of derivatives by the Fed and the U.S. Treasury – via their agent bullion banks – on the gold market in order to control the pricing discovery mechanism. However when the day comes – no, let me rephrase that – when the minute comes that the Comex fails to deliver, it’s over. And many smart people believe that we’re closer to that day than most think…
And the kicker is that traditionally the biggest delivery month of the year is December.
Does the West still have enough gold to feed the appetite of the East?
When the day comes that China and Russia finally announce how much they ‘really’ have (of gold), when they say, “we showed you ours, now show us yours”, will the western vault be opened to expose an empty and echoing cavern?
There is a very palpable tipping point coming in the world. Many can feel it. Things have drastically changed in the Middle East and the United States is evidently being ‘kicked out’. The Russia-China alignment coupled with the last vestiges of the petrodollar is going to one day send all those dollars back to U.S. shores – and we’re going to encounter an apocalyptic shift in our lives. The Exodus out of the dollar will be unstoppable…
These things are a mathematical certainty. The way that I see it, the only other way out (or to defer blame when it happens) is MAJOR WAR. And I feel that the United States, Russia, and China are aligning themselves for the mother of all battles…
One might say that our future is NOT uncertain. It is certain in that it will certainly be volatile, and quite likely one day – perhaps nightmarishly apocalyptic…
Are your preparing?
The statements, views, and opinions expressed in this article are solely those of the author and do not necessarily represent those of EMerging Equity.