The Silver Bear Cafe

June
27
2018

The battle lines are being drawn between gold and fiat as the new global
financial system draws nearer
Daily Economist

We have written numerous times before about how the East is preparing for a return to some form of a gold standard while the West tries to hang on to a dying system of debt based fiat currency. And with the heads of the IMF and Bank of England are both signalling that the world is well underway towards the transition to a new global financial system, the battle lines are being drawn as to which side will win out.

Ironically it is not completely divided between East and West, as a few European governments have been hedging their bets by repatriating their gold from offshore over the past few years. But the race to accumulate gold has been primarily relegated to a few countries such as Russia, China, India, and Turkey, where combined they hold very powerful 'Trump Cards' as their economies, and along with the rest of the BRICS nations, make up 40% of the world's population.

The world now, under very different circumstances, is once again considering official use of gold in the monetary system. A growing consensus agrees that a world-wide monetary crisis is fast approaching and once again the importance of gold as money is being discussed. Those who benefit from the fiat dollar standard are not pleased with this renewed interest in gold, nor with the possibilities that blockchain technology may provide a nongovernment alternative to the current system of money and banking. The principle of gold as money has been acknowledged for thousands of years and is not going to be ignored any time soon.

The current financial chaos brought back the debate over the exact role gold should play in the international monetary system. There are many signs that various governments are considering using gold as an alternative to the fiat dollar. China for the past three years has been a net seller of dollar denominated assets and a major importer of gold. It is making an effort to popularize a gold Yuan to be used in place of the dollar in international oil transactions. China may well have more clout in this endeavor than is generally realized. Other countries like Russia, India and Brazil are cheering the Chinese on and are net purchasers of gold. The US, picking a fight in a senseless trade war with China, only adds to that country’s resolve to stand up to our domineering attitude. – Mises Wire

In addition to these countries seeking to not only accumulate but also integrate gold into the global monetary system, smaller ones like Zimbabwe are themselves seriously looking at backing their currency with gold and other resources.

One of the consequences of 2008 has been the rapidly increasing debt that both nations and the world combined have been accumulating to simply keep the financial system alive. In fact ever since 2008 when global central banks began policies of direct intervention, the amount of global debt has increased by $57 trillion by 2015, with 2017 alone adding an additional $16 trillion to bring that total to $233 trillion.

Ie... not only is that debt unsustainable, but it will continue to increase exponentially until a complete reset is done.

How long it will take to usher in a new financial framework is uncertain, however judging by the fact that European banks and the EU itself stands on the brink of insolvency, and even the U.S. under President Trump is offering more 'butter' than 'bullets' in foreign policy decisions, it is likely that the plans to transition into a new financial system are well underway, and those who are fighting it are perhaps the ones who are quickly being ousted from power (Merkel, Theresa May, etc...).

www.thedailyeconomist.com

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