The Entire Fiat Money System is Bankrupt: Demise of the Global US Fiat Dollar Reserve Currency
It's been a while since I last wrote an article on the on-going financial crisis. I don't write for the sake of writing, as others do because they have to do so, on account of their subscribers who pay hefty subscription fees and demand their money's worth.
Major issues or trends do not change on a daily or even monthly basis. A trend may take a few years to run its course and unless there is a major factor that may affect the trend, there is hardly any need to comment any further on the trend or outcomes.
The events unraveling post Bernanke's decision not to taper QE is most significant because it confirms our analysis that the banking crisis has not been resolved in any significant way after five years of money printing and massive asset inflation. The fiat money system has but one outcome – total collapse. It will also mean the demise of the global US dollar reserve currency.
There are no solutions at hand.
Bernanke is totally discredited and his continued tenure as Chair of the FED would only accelerate the realisation that the FED and all central banks have failed. Hence, the need to change the "leadership" at the FED, but the same policies would be followed with some cosmetic changes to hoodwink the ignorant masses. It is analogous to the transition from the second Bush presidency to that of Obama and all the theatrics of "change" propaganda. In fact, Obama is Bush 2 on steroids! Yellen will be Bernanke on steroids. Why are we so certain of this outcome at Future Fast-Forward?
Our reasons are as follows:
The answer: THE FIAT MONEY SYSTEM IS THE ECONOMY, STUPID!
It used to be that the Petro-dollar was the linchpin of the global economy. However, when the derivatives market took off and became a US$800 Trillion global casino, the US$ toilet paper became the currency in global financial trading and speculation.
All the TBTF banks were leveraged to their eyeballs and the collaterals were hypothecated and re-hypothecated so many times over, it became an inverted pyramid joke.
The collaterals were bundled up into CDOs etc. rated AAA by corrupt rating agencies and traded. We need not repeat this old story. The point we are making here is that not only are the collaterals junks but they are supporting a mountain of debts in the trillions. Therefore, when collaterals are impaired the TBTF banks are in a hole from which they cannot get out. The FED and other central banks have no choice but to bail out the TBTF banks if a systemic failure is to be avoided. If all the junk collaterals were to be off-loaded at once in the full glare of public scrutiny, there would be a run on all the banks. So, what was required was a stealth rescue effort. The TBTF banks were allowed to unload the junk collaterals bit by bit by the various schemes of the FED culminating in the US$85 billion a month purchases of treasury bonds and mortgages by the FED.
Additionally, newly "minted" collaterals were used to replace the junks so as to clean up the balance sheets of the TBTF banks. I have stated earlier that the minimum amount of toxic assets needed to be mopped up is US$20 trillion. After five years, the FED has just scratched the surface. It is debatable how many US$ Trillions the FED has actually pumped into the system directly and indirectly. How much and how long more can the FED continue to pump US$ toilet paper into the system without creating a massive loss of confidence in the dollar? When the balance sheet of the FED reaches US$7 Trillion or maybe US$10 Trillion? It is anybody's guess.
For sure, there will be a point when another US$100 Billion is created on top of the stash of US$ toilet papers which will tip the scale and collapse the entire system. It is a catch-22 for the FED. If it stops creating fiat money out of thin air, the fiat money system would collapse immediately. If it continues with more money creation, it merely postpones the inevitable and more devastating end-game. This is the price we all have to pay for allowing the fiat money system to hold sway for so long.
The world was conned into accepting the biggest Ponzi scheme in the history of banking and finance – the US$ Global Reserve Currency Ponzi Scheme.
This scheme was created on a sand castle of debt, specifically US Treasury Bonds. The world does not need a Global Reserve Currency. Global trade can be conducted in any currency in accordance to the needs and resources of a country.
Why should there be a special privilege given to only one country to have its currency as the sole reserve currency for purposes of trade? It makes no sense as it is the result of US imperialist policies under the pretext of the Cold War. The con was based on the propaganda that the US$ should be the preferred currency and the US Treasury Bond is the "safest asset" to have in the event of an outbreak of war between the Western Imperialist camp and the Soviet bloc. We were told this arrangement was necessary if we are to enjoy the protection of the mighty US superpower!
Yet, when the Soviet bloc collapsed no one questioned the need to perpetuate the system.
Another spin was propagated. The US was the linchpin in the new era of globalisation as the US market was the biggest consumer / export market. Everyone was caught in this web of deceit. The US market was a market built on a mountain of debt. Adding insult to injury, the US consumers paid for the goods produced by millions breaking their backs with US$ toilet paper money!
Some so-called currency experts have asserted that no other currency can replace the US$ toilet paper as the global reserve currency because no other country has a bond market like the US bond market, dominated by the US treasury bonds. What an idiotic statement!
If a country is not in debt, there is no need for any bonds to be issued. A bond is an I.O.U. A bond is a mere paper pledge to repay a debt.
And anyone who says and continues to perpetuate the myth that a US debt is a better debt and is more secure is ignorant and misinformed!
Why would anyone want to work and produce goods which are sold and paid in US$ toilet paper and then use the surplus US$ toilet paper to lend to the US government who repays the debt by merely printing more US$ toilet paper?
So, do you still think the world needs a US$ toilet paper money as a reserve currency?
Matthias Chang is a Malaysian of Chinese descent. He is a Barrister of 32 years standing and once served as the Political Secretary to the Fourth Prime Minister of Malaysia, Tun Dr. Mahathir Mohamad. He is the author of three bestsellers, "Future FastForward", "Brainwashed for War, Programmed to Kill", and "The Shadow Money-Lenders and the Global Financial Tsunami", published in the US and in Malaysia. Since his student days in England in the late 1960s, he was and still is, actively involved in the anti-war movement spanning a period of 41 years. He is a Catholic but enjoins all to promote inter-faith understanding. He resides in Kuala Lumpur, Malaysia, and can be reached at [email protected] or [email protected]