experiment
Julian Philips argues that the concept of a currency as a
measure of value has now departed completely.
Author: Julian Philips
Posted: Tuesday , 25 Sep 2012
JOHANNESBURG (GOLD FORECASTER) -
In 1971 President Nixon closed the window that allowed U.S.
dollars to be sold for gold owned by the U.S.
Just before that, the price of gold was $35 an ounce.
Since then gold has been called a 'barbarous relic', a term
used by Keynes, the famous economist.
From that time on, the world's currencies stood merely on the
confidence their governments engendered and the control they
exercised over international financial dealings of all kinds.
That confidence lasted until 2007 when the credit crunch
brought government financing on both sides of the Atlantic into
question.
Up until now the performance of the underlying value of
currencies has hidden these questions as exchange rates are
adequately 'managed' through swap arrangements to stabilize
exchange rate movements to the extent that violent moves don't
happen.
But the real value of currencies in terms of their real
solvency is now a matter of open debate.
As of now, relative to the amount of gold available to markets,
the price of gold is the only measure of value that currencies
can be held to.
We look at that and look at the conditions that are determining
the value of currencies now and in the future.
The Currency Experiment
When Nixon closed the 'Gold window' to European governments in
1971 he relied on the oil producers of the world to price oil
in U.S. dollars only. This made the USD a necessity.
Except for the few oil producers who refine their own oil,
every country needs to import oil after using the U.S. dollar
to buy it.
This gave the U.S. the control they needed over currency
markets, to ensure that the dollar became and remained the sole
global reserve currency until now.
A look at the euro, which -although the world's largest trading
bloc- shows that if a currency is measured solely on the
performance of its government and Balance of Payments, it
remains vulnerable to market forces that react to that
measurement.
With oil in backup, that vulnerability fades.
That is, until profligate printing of that government's
currency becomes so obvious that it cannot be ignored.
This is where the U.S. dollar is coming to now.
The 'currency experiment' has persisted for 41 years, but for
the last five, it has faltered and continues to do so.
With the focus on the short-term, the real consequences of that
experiment have been largely ignored.
It's time to take a more distant view of what has happened so
that we can get a balanced perspective of its cost.
Value of Paper Money - The Harsh Reality
During the 42 years of the currency experiment with no gold or
silver standing behind currencies we have seen the gold price
multiply from $35 to $1,770.
That's over 50 times in 42 years.
And there's still much more to come it seems, with the
assistance of governments.
If one was fortunate to get out at anywhere above $800 back in
the eighties and back in at $300 in the next twenty years that
number goes up to 64 times $35.
That's what solid long-term funds should have done, to maximize
profits. (It is far better than trading and far less nerve-
racking.)
But don't look at that as a profit figure.
That's not the point we are making here. Look at it as a
statement on the failure of the currency experiment and
currencies' ability to measure value.
Now translate that into the value of savings over that period -
a harsh reality indeed!
Pension Funds
A Pension fund is measured on the money flowing in and less the
money flowing out.
The assets in the middle should be rising to cover the
additional costs of paying pensions when the workers retire and
the cost of living increases.
That's why they depend on Pension Fund Managers and Pensions.
If the money leaving is more than that coming in, then the fund
is moving to insolvency.
As Alan Greenspan pointed out so strongly, this is happening
now and with 'baby boomers' retiring now, that is the current
situation in most Pension Funds (such as is now reported about
the Chicago Teachers).
The future of such Pensioners even now as well as the Pensions
of those working now looks bleak.
If you strip out the causes of higher prices that are due to
supply and demand factors (which usually readjust over time)
then you are left with monetary inflation.
A rate of monetary inflation of 2.5% has been deemed acceptable
because it is manageable and gives the impression of growth.
Today's quantitative easing in the U.S., Europe, Japan and
China has now accelerated to a much faster pace in the hopes of
stimulating faster, sustainable growth.
QE1 and QE2 may have staved off a depression, but they have not
translated into sustainable growth.
We are all now waiting to see if QE3 will do so.
We've all become aware that money printing lowers the value of
a currency; however, the benefits of increased liquidity in the
system -it is hoped- will compensate for that.
Savers are the victims of such a policy, if they save those
currencies even when growth is resuscitated.
Some savvy enough may turn to currencies, which they believe
will not be devalued in the same way and retain their value,
i.e. Yen or Swiss Franc.
But for the last year or so, both the Swiss and Japanese
governments have interfered in the market place to lower the
value of their currencies internationally, so they can retain
their international trade competitive levels.
The Yen is still being treated as a 'safe-haven' currency even
though the Bank of Japan has made it clear that it will
engineer a weaker Yen for a long time to come.
The same is true of the Swiss Franc, both countries placing
their export competitiveness above the value of their
currencies.
We can therefore state:
The concept of a currency as a measure of value has now
departed completely.
Such currency market changes leave room for gold and silver to
act as that measure of value, as currencies fall against them.
Look again at the price of gold before 1970 and now.
It translates into a 100%+ gain every single year for the last
41 years.
(So much for an item you dig up, then put back in the ground.)
But this is a measure of decline in currency value over that
same period!
The culture that precipitated this history is still in control
and certainly intends to continue down that road.
Some commentators believe that the gold price can triple in the
next few years.
That would change the rise from $35 until then to 317% per
annum since before the 1970's.
What will that tell you about the value of currencies the world
over?
And what does that point to in the future?
Julian Philips
U.S. Dollar Collapses -
Japan is the third largest economy in the world -
Japan is mimicking Bernanke's QE decision last week to
attempt to devalue their currencies to boost exports.
The Japanese stimulus is massive and will now
total nearly 20% of Japan's total economy.
The U.S. dollar is falling as these drastic moves
were much bigger than the consensus expected.
CALVF management should be encouraged by
the LT TEAM shareholders to make a new buy back program of
CALVF Au bargain shares
CAL.TO/CALVF has some past early history of delivering increased
value for shareholders in the form of stock buybacks.
These have helped improve financial metrics and increase each
shareholders relative ownership stake in the company,
due to fewer shares outstanding and
holding the same number of shares.
CALVF to share buybacks is the best investment
in the Gold producing industy -
well, plenty of cash from the low cost
CALVF Gold production is on hand -
history often repeat itself -
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79721848
CALVF $GOLD LT, the global financial crisis will probably push Gold
thousands of dollars higher - In the shorter term -
rising commodity prices are Gold's best friend -
ex....
GOLD Demand $AuBull GO High agree with Maund -
high risk - High REWARD -
in last 1930 depression DJIA dump did happen but
GOLD stock kept its demand UP -
history often repeat itself -
GOLD PRICE WILL RISE TO MULTIPLES OF THE CURRENT PRICE -
ALLOCATED GOLD SCANDAL HIT -
GOLD WILL BREAK RANKS FROM THE PAPER CLUTCHES -
PHONY PRICE DISCOVERY METHODS -
THE GOLD PRICE WILL EASE PAST THE $5000 PER OUNCE MARK -
TAKE SILVER ON A GREAT UPWARD RIDE -
THE BANKERS WILL HAVE TO REPLACE THE GOLD -
BY OPEN MARKET PURCHASES AS RESTITUTION -
The events will continue to occur in a sequence -
probably managed much more than we are told -
a new sheriff is in town -
who stepped off jetplane -
few months ago from an Eastern location -
suspect the Western castle dwellers are staging -
systemic collapse in order to impose -
new centralized government -
not be pretty, nor permit rights or liberty -
be described as a debt slavery serfdom -
Western strategy is backfiring -
de-centralization is occurring -
the exact opposite -
primary secure safe haven is Gold -
always has been Gold -
always will be Gold -
The experiment since 1971 when the Gold Standard -
was unilaterally broken by the United States -
is coming to a conclusion -
wreckage is complete and a great tragedy -
new system will emerge -
LIBOR LAWSUITS -
attorneys and aggrieved victims are lined up -
perhaps over 900 thousand lawsuits will come -
how many adjustable rate mortgages were arranged -
from 2005 to 2009, with underwriting banks -
serving the complaints -
army of US legal beagles is on the job -
lost income to the victims is obvious -
lawsuits will eventually target the central banks -
fraud reaches into the $trillions easily -
the derivatives will be factored in -
$trillions in volume times percentages skimmed illegally -
mainstream press carefully avoids such topics -
GOOGLE search of "municipal lawsuits LIBOR" produce >21.1
million hits - story will be gathering momentum -
be in the headlines a year from now -
Demand and supply factors remain in gold’s favour.
There is strong demand from store of wealth buyers in Europe,
China, the Middle East and the rest of Asia – not to mention
strong demand from institutions and central banks.
CALVF GOLD IS SAFE HEAVEN -
CALVF out of long arm US confiscation -
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=76118595
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=77214768
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=77192196
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=77294660
High Risk Paying High REWARDS -
Iceland boasts a 4.5% growth rate -- the best in the Eurozone -
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=77290131
God Bless
Posted By NyBob http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79938397
