An unexpected destruction of fiat currency has been advanced by the monetary and fiscal response to the coronavirus. Financial markets have yet to discount the possibility of such an outcome, but in the coming months they are likely to awaken to this danger.
The question arises as to what will replace fiat currencies. In the past the answer has always been gold but today there are cryptocurrencies as well, whose enthusiasts are more aware than most of fiat money’s failings.
This article describes the basics about money, what it is and the role it plays in order to understand what will be required by the eventual replacement for fiat. It concludes that gold will return as the world’s medium of exchange, and secure cryptocurrencies, unable to provide the scalability and stability of value required of a medium of exchange will be priced in gold after the demise of fiat. But then the rationale for them will be gone, and with it their function as a store of value.
The destruction of fiat money
These are strange times. Circumstances are forcing governments to destroy their money by debasing it to pay for their obligations, real and imagined. If central bankers had a grasp of what money really is, they wouldn’t have got into a position where they are forced to use their seigniorage to destroy it. They are so ignorant about catallactics, the fundamentals behind economics, that they cannot see they are destroying the means of exchange they have imposed upon their citizens with far worse consequences than the abandonment of the evils they are trying to defray.[i]
Unless you believe in a financial form of perpetual motion you will know that all else being equal if you double the quantity of money you approximately halve its purchasing power. It is therefore an incontestable fact that if a central bank doubles the quantity of a circulating fiat currency, it is taking to itself half of the value of everyone’s cash, currency deposits, profits and salaries. It makes everyone poorer and it is simply a travesty to promote monetary inflation as a costless form of economic rescue. Yet the major central banks are now unashamedly admitting to a policy of deploying an infinite expansion of circulating currency.
The effect on capital allocation is equally destructive, because it undermines economic calculation. The suppression of interest rates and increasing quantities of currency tempt businessmen into unprofitable investment decisions which only appear profitable. But inflationism periodically fails as any follower of credit cycles will attest. And the more extreme the policy of inflationism, the more capital is misallocated, and the worse the periodic failures. Today, we can add to these woes monetary and interest rate policies intended to prevent any and all businesses from going to the wall in a final act of capital misallocation.
We now stand on the edge of a global monetary crisis brought about by a new, rapid acceleration of money-printing. Never before have we seen our own governments and those of all our trading partners embark on the same policies of monetary destruction. Never, therefore, will we have seen the scale of global wealth destruction that we about to experience. Unless governments change their inflationary policies, they will lead to the miseries we read about in countries such as Venezuela and Zimbabwe being visited upon us all.
It is extraordinary that modern economists are blind to the true effects of inflation, which have been known since the dawn of money. Nicolas Oresme, a French bishop in the fourteenth century and a notable translator of Aristotle, warned of debasement:
“I am of the opinion that the main and final cause why the prince pretends to the power of altering the coinage is the profit or gain which he can get from it… the amount of the prince’s profit is necessarily that of the communities’ loss but whatever loss the prince inflicts on the community is injustice and the act of a tyrant and not of a king, as Aristotle says. And so, the Prince would be at length able to draw to himself almost all the money or riches of his subjects and reduce them to slavery and this would be tyrannical, indeed true and absolute tyranny as it is represented by philosophers, and in ancient history.”[ii]
As a description of inflation, it was a continuity statement of what was known from classical times. In Oresme’s day and before, the principal form of debasement was of the coinage. It is no different from issuing any form of money or credit unbacked by a valuable metal. Apart from alchemists dreaming of creating gold out of something else, the principal deniers of the true purpose of inflationism have been John Law in eighteenth century France, Geog Knapp and his chartalists in Bismarck’s Germany, and Lord Keynes the consequences from which we are suffering today. Oresme was spot on. The whole purpose of debasement is to fund the state, and the state licences banks for that purpose, extending monetary favours to big business as well. Forget the flummery about stimulating us; that amounts to a cover for statist robbery of our wealth.
The coronavirus is not the cause of this folly. It has only shortened timescales, the likely time before we discard fiat currencies entirely. It has brought forward the time when homo economicus anticipates the total loss of the government currency’s purchasing power. From that moment, those of us unwilling to descend into barter will seek a new medium of exchange. In desperation, governments are likely attempt to provide alternatives. If so, it almost certainly will be a variation on the fiat theme, which they find impossible to abandon for lack of finance. They will then discover that a lasting money is not to be chosen by the state, but by the people.
This has been the lesson of history. Those who think economics as a science started with Keynes, and preceding theories were thereby invalidated, are in for a primal shock. It is time to relearn the basics about money so that we can anticipate what form of money will endure as a replacement for the failure of government fiat currency.
There are two incontrovertible facts that underlie economic analysis and the role of money. The first is that the division of labour is more productive than the work of isolated individuals. That is to say, individuals maximise their productivity by deploying their individual skills, relying on their enhanced output to acquire all their other needs and wants from other specialising producers in their community. Not even Marx denied this, nor all the other socialists who emerged on the economic and political scene from his time onwards. Only Keynes denied it in order to impart validity to his General Theory.[iii]
Socialist economists even agree with the second incontrovertible fact, that, ascetics aside, individuals prefer a higher productivity of their labour to a lower one. Socialist arguments were not against these facts but dispute which way of dividing labour is most productive. Marxists have argued that the division of labour should be harnessed for the benefit of the state, and that instead of being exploited by employers, labourers would become happier and more productive. Less extreme socialists simply believe that there is little or no difference of production output in a business controlled by the state, compared with one in private ownership.
It therefore follows that to facilitate the division of labour, the role of money is to facilitate an exchange of goods. It enables people to choose between goods and services, and therefore for people to exercise their judgement of the relative values they place on different goods. It enables them to choose.
Value is not to be confused with prices. Value is an expression of a graded preference between goods, the assessment of one against another. Money is the commodity whose sole function is to facilitate the transfer of production into needed and desired consumption in order to satisfy individual scales of value. The difference between value and its realisation as a price in a transaction devolves into subjective values placed by different individuals for goods and services being exchanged and into a common objective value for money.
Separately from money’s objective transactional value, transacting individuals have different values for money itself relative to a particular product within money’s objective context. In a transaction it follows that one party will value a given quantity of money more than the good at the point of exchange, while the other party will value the good more than the quantity of money demanded; otherwise an exchange cannot take place. The exchange is recorded as a price expressed in money terms.
This description crams into a few paragraphs the relationship between value and money. It is a topic rarely addressed by modern economists, which is one reason the catallactic role of money is poorly understood. A second, and no less important reason is the defining literature on the subject originated in Austria in German, with the unfamiliar names to the Anglo-Saxon ear of Menger, Böhm-Bawerk, Wieser and Mises amongst others. Instead, the neo-classical economics of today ignores all subjectivity and has evolved into an inflexible mathematical macroeconomic certainty, eliminating unpredictable human action, melding value with prices.
But from these basics all other roles of money are derived. Clearly, while one party wants the money more than the item being exchanged and the other prefers the item to the money, both parties in a transaction will require a medium of exchange that is stable. They can then agree an objective value at the time of the transaction. But when an individual or business sells his, her or its production, the money gained is not immediately exchanged for other goods. Money must therefore have more than an objective value at the time of a transaction, because it is also the temporary storage of labour or of a business’s output.
It is fundamental that all economic actors are confident that the purchasing power of money does not alter for the time they are likely to possess it in lieu of the goods and services yet to be acquired, else they will either dispose of the money more rapidly than they would otherwise, or alternatively hoard it to a greater extent than they would normally require. And when the division of labour is organised into a cooperative system, such as a business involving numbers of people, rewarding them for production by paying fixed salaries, it is a fundamental assumption of all employment contracts that the salary does not alter in its purchasing power.
The stability that qualifies money as the medium of exchange over time is also fundamental to related functions, such as the ability of transacting parties to agree deferred payment terms and the facility of money to permit adjustment for risk factors between a transaction and its final settlement. Other than deferred payments based purely on trust, deferred settlements will reflect a level of time preference agreed between acting parties. This is the measure of the difference between values of immediate possession and deferred possession for the period agreed.
The greatest value for transacting parties is for possession sooner, with future possession valued less. All commodities are subject to this rule. Furthermore, money’s time preference is also subject to this rule and will reflect money’s own characteristics as well as those of goods being exchanged.
Instead of being expressed as a discount to current possession, the time preference of future possession is expressed as an annualised interest rate. Assuming a current valuation of a future value, a time preference value of 95 per cent of current ownership in one year’s time is the same as an interest rate of
(100-95)/95 = 5.26%.
Time preference can only be agreed between transacting parties, and it is impossible for outsiders, such as the state, to know what that value is. With respect to money, this is commonly termed the originary rate of interest, shorn of other considerations, such as transactional risk and anticipated changes in the prices of future goods, which are additional factors.
It should be apparent that a medium of exchange discharges its functions most effectively when the transacting public has the greatest confidence in the money’s stability, leading to a relatively low level of time preference. Policies of state inflationism undermine this condition and, if continued, inevitably leads to the loss of confidence in fiat money altogether. Recent events, the combination of a downturn in the credit cycle and the economic consequences of the coronavirus, have committed central banks to an unlimited increase of monetary inflation, which in addition to the suppression of all time preference, by imposing zero and negative interest rates on economic actors, will bring forward the day when faith in fiat currencies is lost entirely.
We can therefore anticipate the death of today’s fiat currencies. It is a mistake to think it will be a gradual process: it has already been gradual since the late 1960s, when the remaining fig-leaf of gold convertibility was finally abandoned with the failure of the London gold pool. Since then, measured in gold the dollar has lost over 97% of its purchasing power compared with gold. Given this latest acceleration of monetary debasement, it is likely to be the nail in the coffin for the fiat dollar. Instead of a continuing decline, the outcome is likely to be a final collapse, not just through its over-issuance, but because fiat money will have lost all its derivative functions. The only thing missing is public awareness.
The end of fiat money can be defrayed by reverting to a gold standard, turning it from pure fiat to a representative of gold. But that will only be a lasting solution if the state stops intervening in the economy, runs balanced budgets and embraces free markets. Unfortunately, inflationism in the form of neo-Keynesian economics is so ingrained in political thinking that many central banks will look to invent new forms of fiat money instead of returning to a gold exchange standard.
One of the alternatives being experimented with is state-issued cryptocurrencies, but it is not yet clear what purpose they are intended to serve. Crucially, they are sure to differ from bitcoin and similar cryptocurrencies by having a centralised ledger under state control. Apart from the questions raised by wider uncertainties surrounding the durability of a cryptocurrency’s use-value, unless the state version is backed convincingly by gold, it will be no more than a dressed-up fiat currency, a successor to failure unlikely to obtain enduring public trust. For the moment, we must dismiss state issued cryptocurrencies as irrelevant to our analysis, because independent cryptocurrencies are better stores of value due to their distributed ledgers.
Gold as money
The inflationists deny that gold should play any monetary role, for the simple reason that it hampers inflationist policies. Being the most likely way of securing a currency, for a gold exchange standard to work will require strict rules-based monetary discipline.
A gold exchange standard is comprised of the following elements. The new issues of state denominated currency must be covered pro rata by additional physical gold, and it must be fully interchangeable at the public’s option. The state is not required at the outset to cover every existing banknote in circulation, but depending on the situation, perhaps a minimum of one-third of the issue should be covered by physical gold at the outset when setting a fixed conversion ratio. The point is that further note issues must be covered by the issuer acquiring physical gold.
Banknotes which are “as good as gold” are a practical means of using gold as the medium of exchange. Electronic money, being fully convertible into bank notes must also be convertible into gold.
A gold exchange standard also requires the state to radically alter course from its customary inflationary financing. The economy, which has similarly become accustomed to future flows of apparently free money, will have to adjust to their future absence. Consequently, the state has to reduce its burden on the economy, such that its activities become a minimal part of the whole; the smaller the better. It must privatise industries in its possession, because it cannot afford to absorb any losses and inefficient state businesses detract from overall economic performance. At the same time, the state must not hamper wealth creation and accumulation by producers and savers as the means to provide investment in production. Government policy must be to stop all socialism, allowing charities to fulfil the role of welfare provision, and let free markets have full rein.
Broadly, this was how British government policy developed following the Napoleonic wars until the First World War, and the proof of its success was Britain’s commercial and technological development, entirely due to free markets. But the British made one important mistake, and that was in the Bank Charter Act of 1844, which in England and Wales permitted the expansion of unbacked bank credit. For this reason, a cycle of credit expansion developed, punctuated by sharp contractions, the boom and bust that led to a series of banking crises. A future gold exchange standard must address this issue, by separating deposit-taking into a custodial role and the financing of investment into an agency function.
It is a common error of neo-Keynesian economists to believe gold is an unsuitable medium for financing modern trade and investment, because, it is often alleged, it lacks an interest rate. Since interest rates existed throughout gold standards, the confusion arises from assuming an interest rate attaches to paper currency. But if a paper currency is fully convertible into gold, then interest rates are effectively for borrowing and lending gold, and do not apply to the currency. The best measure of what savers may gain by lending their gold savings risk-free is the yield on government debt, repayable in gold and realisable in the market at any time. This is illustrated in Figure 1.
Shortly after the introduction of the gold sovereign in 1817, the yield on undated government debt gradually fell to 2.3% in 1898. This reflected a natural decline in time preference as free markets delivered increasing benefits and accumulating wealth for the British population. Following the gold discoveries in South Africa, between the early-1880s and the First World War global above-ground stocks of gold doubled, and the inflationary effects led to a rise in government Consols yields to 3.4%.
The encouragement to investors to provide financial capital for investment in industry and technology was two-fold. A family’s investment in 1824 rose in value due to the long-term fall in Consols yields. By 1898, invested in Consols it would have appreciated by 65%. At the same time, the rise in the purchasing power of gold-backed sterling increased approximately 20%. Saving and family inheritance were rewarded.[iv]
Importantly, above ground gold stocks have grown at approximately the rate of that of the global population, imparting a long-term stability to prices in gold. For this reason, it is often said that measured in gold the cost of a Roman toga is not much different from that of a modern lounge suit. Other money-related benefits of gold and gold exchange standards compared with those of pure fiat also follow from this stability.
Between countries that use gold and gold substitutes as money, except for short-term settlement differences covered by trade finance, balance of payments imbalances only existed to adjust price levels between different nations. If a country exports more goods and services than it imports, it imports gold or gold substitutes on a net basis. The increased quantity of gold in that country tends to adjust the general level of prices upwards to the general level of prices in countries that are net importers of goods and services, which find the outflow of gold has moved their prices correspondingly lower. The ability to issue unbacked currency has been removed, so net balance of payment flows become a pure price arbitrage. This is in accordance with classical economic theory and has its remnants today in concepts such as purchasing power parity.
In summary, gold retains the qualities that ensure it will always be the commodity selected by people to act as their medium of exchange. It offers long term price stability and is the ultimate fiscal and monetary discipline on governments, forcing them to reduce socialist ambitions, to accept the primacy of free markets, and to permit acting individuals to earn and accumulate wealth. Being fully fungible, gold is suitable backing for substitute coins and banknotes. It is an efficient medium for providing savings for the purpose of capital investment. And the tendency for prices measured in gold to fall over time driven by natural competition and technology ensures a low and stable originary rate of interest.
Bitcoin and similar distributed ledger cryptocurrencies
Now that we have defined money and identified why fiat currency is on an accelerating path to failure, we must look at the much-mooted alternative to gold of cryptocurrencies, the most notable of which is bitcoin. For simplicity we shall comment on bitcoin only.
The principal characteristics of bitcoin are its pre-programmed limited and capped rate of issue, and its distributed ledger otherwise known as the blockchain. The former distinguishes it from fiat currencies, which as we have seen are beginning their final inflation run, and the latter ensures governments cannot gain control or otherwise interfere with it.
While governments can confiscate their citizens’ profits, close down cryptocurrency exchanges and direct their licenced banks not to accept or make payments in connection with cryptocurrencies, they have yet to do so. So far, when authorities have intervened, the reasons given have been to tackle fraud, real and imagined, and alleged money-laundering. For governments to shut cryptocurrencies down would probably require international cooperation by all governments to deny the right to own cryptocurrencies. An agreement on these lines would be almost impossible to achieve and would take many years of intergovernmental negotiation, given the violation of property rights involved and the precedents created. Due to the accelerated timescale of the demise of fiat currencies, intervention of this sort seems unlikely.
Bitcoin will therefore survive government intervention to become a possible replacement for fiat currencies. But there is the practical problem of exchange being broadly limited by users looking for investment and speculation, rather than being used as payment for goods. This is for good reason: in any transaction an acting man will want all the price subjectivity to be reflected in the goods being exchanged and objective values to be confined to the currency. Currently, bitcoin’s volatility is extreme as shown in Figure 2, which compares bitcoin priced in gold ounces with gold priced in dollars.
Gold’s volatility against the dollar approximates to the volatility of any another currency, and its upward trend principally reflects the declining purchasing power of the dollar. Even priced in gold ounces, bitcoin’s volatility has been dramatic, too dramatic to act as the objective value in an exchange for goods.
Unless bitcoin’s volatility subsides sufficiently so that it becomes widely accepted as a medium of exchange, it cannot act as efficient money in the catallactic sense. Furthermore, the blockchain system is too cumbersome for a global medium of exchange, currently limited to about half a million transactions daily when trillions are required.
While accepting that bitcoin’s other monetary features have yet to be developed, volatility would also appear to rule out agreements between lender and borrower on the value of time preference as the basis of using it for deferred settlement. For now, bitcoin appears to be good for buying with a view to selling in return for another form of money, rather than acting as money itself. Undoubtedly, owners of bitcoin, or hodlers as the slang term puts it, are valuing them in dollars, and thinking of taking profits in dollars. It appears that hodlers are speculating on bitcoin’s rise, rather than the dollar’s fall, though that will change as the general public begin to ditch their fiat currencies.
When hodlers finally understand this distinction, in the absence of fiat money and using bitcoin for day-to-day exchanges for goods, what will they sell them for? If we rule out purchases of other cryptocurrencies, the answer can only be for metallic money, gold, or properly constituted gold substitutes.
While we can draw attention to a cryptocurrency’s lack of monetary characteristics, it does not mean we can dismiss them as being merely speculative counters. Circumstances change, and it is likely that when the general public finally understands that fiat currencies are worthless, it will look for alternative stores of wealth. Bitcoin enthusiasts are among the first to understand the benefits of hoarding wealth against failing fiat currencies. Furthermore, technological innovation could provide solutions to bitcoin’s lack of transactional scalability.
Central banks are also running cryptocurrency and blockchain projects, so far with little apparent sense of direction beyond trying to keep abreast of developments. The most advanced state appears to be China, which is trialling a digital version of the yuan. But far from having the characteristics of a cryptocurrency, any version of the yuan digitised or not is, for the moment at least, just a fiat currency.
In the final analysis, whether bitcoin becomes money is down to what the transacting public decides. But for now, it remains a hedge to fiat currency risk, with the potential for the price to rise, not just reflecting the demise of the dollar and other fiat currencies but rising in its own right. The market for bitcoin is potentially huge, far larger than the feed into any speculative bubble in history, with billions of people possessing mobile phones capable of acquiring them.
The inflationists, encompassing the entire financial establishment and their epigones, fail to see the ending of fiat currencies. But a rational and objective analysis coupled with empirical evidence tells us that the sudden and rapid escalation of monetary expansion, aimed to ensure financial assets do not fail, will lead to the destruction of the dollar as the world’s principal medium of exchange. And with the reserve currency gone, it is very unlikely the other major fiat currencies will survive.
The question then arises as to what will replace fiat currencies. Government attempts to extend the life of fiat money by issuing new versions imitating cryptocurrencies will fail, only likely to extend the life of fiat by a matter of months, if at all. Existing cryptocurrencies, even the best of them, are not currently suitable replacements due to their lack of scalability and volatility. Furthermore, for now bitcoin is the preserve of investors and speculators, taking a punt on the demise of fiat, without an exit plan other than to measure or take profits in a fiat currency.
The same accusation can be levelled at gold, which is probably even less used in transactions for goods than bitcoin. But gold has the advantage of a track record of always returning as the money of public choice after fiat fails. Together with its suitability for deferred settlements, we can therefore be certain that gold will be money once again, while we cannot be so certain of the future for cryptocurrencies.
This is not to say that cryptocurrencies will not afford protection for individuals as fiat fails, only that an exit route has yet to evolve, other than being spent as money. Consequently, cryptocurrencies might retain investment or speculative value, but it will end up being measured in gold. That being the case, the reasons for using cryptocurrencies as an escape from failing fiat will disappear when gold becomes money again, along with a future role for cryptocurrencies as mediums of exchange.
BY JAMES RICKARDS: Source is DailyReckoning.com MARCH 25, 2020
Since Federal Reserve resources were barely able to prevent complete collapse in 2008, it should be expected that an even larger collapse will overwhelm the Fed’s balance sheet.
That’s exactly the situation we’re facing right now.
The specter of a global debt crisis suggests the urgency for new liquidity sources, bigger than those that central banks can provide. The logic leads quickly to one currency for the planet.
The task of re-liquefying the world will fall to the IMF because the IMF will have the only clean balance sheet left among official institutions. The IMF will rise to the occasion with a towering issuance of special drawing rights (SDRs), and this monetary operation will effectively end the dollar’s role as the leading reserve currency.
The Federal Reserve has a printing press, they can print dollars. The IMF also has a printing press and can print SDRs. It’s just world money that could be handed out.
The IMF could function like a central bank through more frequent issuance of SDRs and by encouraging the use of “private SDRs” by banks and borrowers.
What exactly is an SDR?
The SDR is a form of world money printed by the IMF. It was created in 1969 as the realization of an earlier idea for world money called the “bancor,” proposed by John Maynard Keynes at the Bretton Woods conference in 1944.
The bancor was never adopted, but the SDR has been going strong for 50 years. I am often asked, “If I had 100 SDRs how many dollars would that be worth? How many euros would that be worth?”
There’s a formula for determining that, and as of today there are five currencies in the formula: dollars, sterling, yen, euros and yuan. Those are the five currencies that comprise in the SDR calculation.
The important thing to realize that the SDR is a source of potentially unlimited global liquidity. That’s why SDRs were invented in 1969 (when the world was seeking alternatives to the dollar), and that’s why they will be used in the imminent future.
At the previous rate of progress, it may have taken decades for the SDR to pose a serious challenge to the dollar. But as I’ve said for years, that process could be rapidly accelerated in a financial crisis where the world needed liquidity and the central banks were unable to provide it because they still have not normalized their balance sheets from the last crisis.
“In that case,” I’ve argued previously, “the replacement of the dollar could happen almost overnight.”
Well, guess what?
We’re facing a global financial crisis worse even than 2008. That’s because each crisis is larger than the previous one. The reason has to do with the system scale. In complex dynamic systems such as capital markets, risk is an exponential function of system scale. Increasing market scale correlates with exponentially larger market collapses.
This means a market panic far larger than the Panic of 2008.
SDRs have been used before. They were issued in several tranches during the monetary turmoil between 1971 and 1981 before they were put back on the shelf. In 2009 (also in a time of financial crisis). A new issue of SDRs was distributed to IMF members to provide liquidity after the panic of 2008.
The 2009 issuance was a case of the IMF “testing the plumbing” of the system to make sure it worked properly. With no issuance of SDRs for 28 years, from 1981–2009, the IMF wanted to rehearse the governance, computational and legal processes for issuing SDRs.
The purpose was partly to alleviate liquidity concerns at the time, but also partly to make sure the system works in case a large new issuance was needed on short notice. The 2009 experience showed the system worked fine.
Since 2009, the IMF has proceeded in slow steps to create a platform for massive new issuances of SDRs and the creation of a deep liquid pool of SDR-denominated assets.
On Jan. 7, 2011, the IMF issued a master plan for replacing the dollar with SDRs. This included the creation of an SDR bond market, SDR dealers, and ancillary facilities such as repos, derivatives, settlement and clearance channels, and the entire apparatus of a liquid bond market. A liquid bond market is critical.
The IMF study recommended that the SDR bond market replicate the infrastructure of the U.S. Treasury market, with hedging, financing, settlement and clearance mechanisms substantially similar to those used to support trading in Treasury securities today.
In November 2015, the Executive Committee of the IMF formally voted to admit the Chinese yuan into the basket of currencies into which an SDR is convertible.
In July 2016, the IMF issued a paper calling for the creation of a private SDR bond market. These bonds are called “M-SDRs” (for market SDRs) in contrast to “O-SDRs” (for official SDRs).
In August 2016, the World Bank announced that it would issue SDR-denominated bonds to private purchasers. Industrial and Commercial Bank of China (ICBC), the largest bank in China, will be the lead underwriter on the deal.
In September 2016, the IMF included the Chinese yuan in the SDR basket, giving China seat at the monetary table.
Over the next several years, we will see the issuance of SDRs to transnational organizations, such as the U.N. and World Bank, to be spent on climate change infrastructure and other elite pet projects outside the supervision of any democratically elected bodies. (I call this the New Blueprint for Worldwide Inflation.)
The SDR can be issued in abundance to IMF members and can also be used in the future for a select list of the most important transactions in the world, including balance-of-payments settlements, oil pricing and the financial accounts of the world’s largest corporations, such as Exxon Mobil, Toyota and Royal Dutch Shell.
So the international monetary elite has been awaiting the global liquidity crisis that we’re facing right now. In the not-too-distant future, there will be massive issuances of SDRs to return liquidity to the world. The result will be the end of the dollar as the leading global reserve currency.
SDRs will perhaps never be issued in bank note form and may never be used on an everyday basis by citizens around the world. But even such limited usage does not alter the fact that the SDR is world money controlled by elites.
But monetary resets have happened three times before, in 1914, 1939 and 1971. On average, it happens about every 30 or 40 years. We’re going on 50.
So we’re long overdue.
You’ll still have dollars, but they’ll be local currency like the Mexican peso, for example. But its global dominance will end.
Based on past practice, we can expect that the dollar will be devalued by 50–80% in the coming years.
A devaluation of this magnitude will wipe out the value of your life’s savings. You’ll still have just as many dollars, but they won’t be worth nearly as much.
Individuals will not be allowed to own SDRs, but you can still protect your wealth by buying gold — if you can find any.
Looking over the year that has just been, it has become clear that we will now need to stand up for our right to Freedom.
Unfortunately the global reaction to Covid 19 has been the Govt’s reason to restrict people’s freedoms. Some have been calling Covid 19 a Plandemic – and there is evidence that gives that warning credence. Either way, we have all lost our freedoms in 2020.
There are serious concerns that Governments are moving towards a more planned and controlled system which looks very much like the old forms of socialism, fascism and maybe even communism. All these systems of governing have failed over the years because we all innately desire to be free to make our own decisions. We don’t want to be controlled or told how we should act or what we are allowed to do with our own lives; we all know in our hearts that we have been created to be FREE.
Those who promote these forms of Government do so because it gives them more power and freedom to do what they want to others. Their freedoms are not restricted, only the people who are not in the position to control and dominate, lose their freedoms.
Anyone who has lived in a country that has an authoritarian dictator or a totalitarian governmental system where power is centralised in the hands of a few, would say they want to immigrate to a free society where their rights are respected.
Many immigrated to the United States and Canada and Australia and other freer countries, because they wanted to escape the oppressive society where they were persecuted, oppressed, and controlled by authoritarian leaders and an elite ruling class.
As long as the society has honest people who are in charge of the basic rule of law and citizens are respectful of a fair and equitable system of rules that all people have agreed to obey, then you have a free and liberated country where people are safe to conduct commerce and live together in harmony and freedom.
The founding fathers of many of the democratic counties understood these freedoms and set in their constitutions principles that all governmental leaders must obey or they commit treason!
US President Abraham Lincoln respected these principles in his speech at Gettysburg, in November 1863 he said:
“Four score and seven years ago our fathers brought forth on this continent, a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal.
Now we are engaged in a great civil war, testing whether that nation or any nation so conceived and so dedicated, can long endure. We are met on a great battle-field of that war. We have come to dedicate a portion of that field, as a final resting place for those who here gave their lives that that nation might live. It is altogether fitting and proper that we should do this.
But, in a larger sense, we cannot dedicate, we cannot consecrate, we cannot hallow this ground. The brave men, living and dead, who struggled here, have consecrated it, far above our poor power to add or detract. The world will little note, nor long remember what we say here, but it can never forget what they did here. It is for us the living, rather, to be dedicated here to the unfinished work which they who fought here have thus far so nobly advanced.
It is rather for us to be here dedicated to the great task remaining before us, that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion, that we here highly resolve that these dead shall not have died in vain
that this nation, under God, shall have a new birth of freedom and that government of the people, by the people, for the people, shall not perish from the earth.
The American people were fighting to maintain a united system of freedoms for all citizens including all the Afro-American population that had been in servitude by the ruling elite.
Today the US is in another war to remain a Presidential Republic where the people have the ability to elect those they believe will represent them and protect their freedoms.
Today the US is in another war to remain a Presidential Republic where the people have the ability to elect those they believe will represent them and protect their freedoms.
It is my belief, based on what has happened during the 2020 Presidential election that America is at the very edge of losing their Republic. Unfortunately it now seems those freedoms have been eroding over many years and many are now waking up to the fact that US Freedoms are in serious threat of disappearing.
In Australia, it may come to your surprise that we may well be in the same situation, given we have often followed what happens in the USA.
Consider the excessive police powers Premier Andrews has wielded during the pandemic. The right to demonstrate has been removed and we have been restricted to our homes, suffering under a curfew. Has this been to protect the population or have these powers been established for a more sinister future agenda? Will the state governments remove those police powers once the pandemic is gone? Or will there be another crisis that will close down the borders and restrict our movements again?
Consider the Federal Governments deliberation in making vaccines mandatory and the Federal Governments plans to ban the use of cash.
In 2010 the G20 nations met in Brisbane Australia and discussed the need for “bail in” powers for Australian Banks, in order to prepare for the next GFC when depositors funds will be confiscated in order to prop up the banking system.
With the possibility of negative interest rates, will all depositors be subject to negative interest on deposits and zero ability to avoid that loss? “Bail in” laws are now in place in our Banking Act and both Labour and Liberal parties have refused to close the “Bail in” loop hole!
It has now become very apparent that the world cannot trust the traditional media to tell the truth about the level of corruption going on in our society. Even the new online media has only tightened the grip of the ruling elite who own and control the world’s media. Thank God we still have a free internet that is relatively uncontrolled by those who seek to manipulate and direct the global narrative.
This pandemic has been a useful distraction where it has deflected people’s attention away from what has been going on in the financial system. In September 2019 the short term money market known as the “repo market” spiked to 10% and the US Federal Reserve had to step in and inject large amounts of liquidity to stop the financial system from going into meltdown.
That capital injection has not stopped with the advent of the pandemic and it has only increased to the point that many trillions of dollars have now been fabricated in order to prop up the global economy.
This type of intervention would even cause John Maynard Keynes to serious reconsider his thesis on money creation.
This is the reason why certain asset prices have recently been increasing in price like Gold, Silver and Bitcoin. Up to now this money creation has only really been benefiting the super wealthy, which explains why assets like large estates, fine art, exclusive cars, jets and yachts, and exotic bug out shelters have been appreciating.
Can anyone explain why western governments have focused so much attention on finding a Covid 19 vaccine, but have said nothing about safe low cost alternatives like Hydroxychloroquine, Ivermectin with Zinc and or encouraged the taking of important vitamin’s to build your immune system like vitamin D and C. Since August 2020 there have been mountains of data showing that early usage of Ivermectin can cure 100% of Covid 19 patients.
Have our political leaders surrendered to big Pharma so much that they won’t even consider other low cost alternatives that will save the nation millions in their already broken budgets? It seems that not only are the masks we are wearing stopping us from smiling they are also sending us a message “You are not allowed to speak and question authority”
Well I think our political leaders and ruling elite are going to find out that when the billions of common people wake up and realise they have been fed a lie – this coup d’etat is going to come off the rails.
It’s time for you and I to stand up and speak as loudly as possible that we reject Totalitarianism and we will not give up our freedoms. The time is late, we have only a narrow window to reverse this evil agenda, but fight we must. Remember it’s not the common policeman on the beat or the bank employee or even the successful businessman going about his normal business affairs that is responsible – it is just a few people at the top who are calling the shots.
There are many good people who don’t want to destroy your freedoms – but many of us have given into greed and self-centredness where we are just taking care of ourselves – not wanting to rock the boat. But if the boat is headed into a typhoon where everyone in society will lose their lives – wouldn’t you want to get the boat turned around before it sinks?
I will leave you with a quote from Martin Niemoller who was a German Lutheran Minister who was intimately acquainted with Hitler’s Nazi Third Reich rise to power and who was eventually arrested and sent to Dachau concentration camp. If Niemoller and fellow church leaders had of opposed Hitler in 1933 – Hitler would have lost his popular support and would never have risen to power.
It is never too late to say no to tyranny.
First they came for the Communists And I did not speak out Because I was not a Communist
Then they came for the Socialists And I did not speak out Because I was not a Socialist
Then they came for the trade unionists And I did not speak out Because I was not a trade unionist
Then they came for the Jews And I did not speak out Because I was not a Jew
Then they came for me And there was no one left To speak out for me
I have reported on www.alancurrie.com in the past that central bank “Quantitative easing” policy since 2009 has only caused the financial system to become more fragile and the intended purpose of injecting financial liquidity into “main street” has not worked. Because all the money went into Wall Street and Big Banks making the .1% financial elite wealthier.
This is why we have not seen “obvious” inflation or Hyper Inflation because the money did not end up into your pocket, but into the super rich. There has however been huge increases in the average house price in last 10 years and elite assets like paintings, luxury yachts, luxury houses, cars and collectables.
For example a 1962 Ferrari 250 sold for $48.4 Million USD, 1 bottle or rare Scotch Whisky sold for 1.2 million pounds, and Leonardo da Vinci’s Salvator Mundi sold in Christie’s for $450.3-million in NYC. The inequity between the rich, middle class and less advantaged has now become a gaping chasm.
Coming up to Christmas holidays the JetStar employees are on strike asking for a 13% wage increase. You might think that’s excessive until you realise that the JetStar crew get paid $41 per hour but the CEO of Qantas Alan Joyce (Qantas the owner of Jetstar) gets paid $9000 per hour! The Jetstar CEO is only willing to accept a 3% wage increase, however the real cost of living is much higher.
Our financial system has become more un-fair, fragile and much of the blame has to rest with Central Banks, easy credit and deep and systemic corruption in our banking system.
Two interesting facts are that 3 versions of a central banks in USA were rejected by the the founding fathers and US Presidents. Today only two countries remain in the world without central banks controlled by the Rothschild dynasty.
After listening to a new book ” Treasure Islands – Tax Havens and the men who stole the world” I have come to realise that most of the worlds global finances flow through international offshore tax havens. The size of the financial flows are incalculable because of all the secrecy and the fact that global banks and governments are involved.
The Australian Government has recently proposed a $10,000 AUD cash ban legislation to supposedly stop the black economy, however the very accounting firms who have suggested this legislation also help financial institutions and corporations to “legally” avoid tax via these offshore jurisdictions.
On 2nd Dec MP Bob Katter introduced legislation into the house “Australian Bank Government Audit Bill” it is worth reading Mr Katter short intro to the bill. This is one short quote “Ernst & Young gave a clean bill of health to Lehman Brothers in July 2008, two months before its bankruptcy precipitated the global banking crash. The New York Attorney-General accused Ernst & Young of helping Lehman Brothers engage in a massive accounting fraud.“
The Bank of International Settlements BIS in Switzerland has been warning for some time about the fragility of the banking system. The latest BIS Dec 2019 report says “FX trading returned to its long-term upward trend, rising to $6.6 trillion per day in April 2019. Interest rate derivatives trading departed sharply from its previous trend, soaring to $6.5 trillion.”
Warren Buffet once said “In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”
The encouraging sign in all this mess is that the average person is learning the truth of what has been happening and is starting to look for ways to do something about the problem. The global elite are worried and continue to push forward, but my hope is that Freedom will prevail. Our “Trump” card (pun intended) is that the creator and defender of Truth, Justice and Freedom will defend anyone who wants to fight for these principles.
It should also be no surprise Boris will implement Brexit on 31 October, the last date agreed between Mrs May’s government and the EU. Johnson was elected by Conservative constituency members to do just that. His cabinet appointees are fully supportive, including ex-Remainers (that’s politics!) and he has appointed an aggressive rottweiler, Dominic Cummings, as his Brexit enforcer. Already, his influence over Brexit strategy can be detected. There are no compromises to be had, a point which slower minds in the commentariat find difficult to comprehend and accept.
It is likely there will be an agreement on the way forward after Brexit, which could involve a transition period, but nothing like that agreed with Mrs May. If, as seems unlikely, the EU digs its heels in, the UK will walk away. That is the message being given by the new administration.
The establishment media are still wrong-footed on Brexit. The BBC, and others, have been too idle to analyse properly, taking their information from biased pro-remain sources and politicians who are out of the loop. They are still doing it. Disinformation is substituted for truth.
The EU, disinformed by Remainers including a chorus of past ministers and prime ministers, has relied on the divisions within Parliament to put Britain into a political and economic stasis. Their repeated utterances (there will be no new negotiation, the withdrawal agreement stands etc.) reflect the continuation of the EU’s established position. That is likely to change, because the EU will find it is forced to accept the dangers to its own position.
There is a crucial difference between the new cabinet and its predecessor. In Johnson, as well as ministers such as Rees-Mogg, Raab, Javid and Gove there appears to be an understanding of and commitment to free markets, unlike anything we have seen since Margaret Thatcher. Obviously, the strength of that commitment is yet to be tested.
The new reality and the dismissal of the old socialising compromisers should swing Parliament behind the instructions given to it by the electorate in the Brexit referendum. An advertising campaign to prepare everyone for Brexit without a deal starts now. The strategy is not to go to Brussels (UK-US is being negotiated first) but only when Brussels comes to its senses will a dialog commence. Facing a lost cause, Remainers are likely to melt like midsummer hailstones, and the euro-nuts, like Dominic Grieve, will sink into obscurity.
The electoral consequences are appalling for the Labour Party. By changing from its conditional support for implementing the Brexit referendum to demanding a second one with the intention of overturning the first, they have almost guaranteed that in a general election they will face a wipe-out. This is important, because it means that they have no incentive to table a vote of no confidence in Johnson’s government. They have already gambled and lost.
Because of Labour’s bad call it looks like Boris’s government will get its way and is here to stay, not only through Brexit, but beyond. The EU will have to get used to it. The Europeans have lost control over the negotiations and seem unlikely to get more than a pittance of the £39bn settlement agreed with Mrs May. When Boris refers to our friends in Europe, he actually means our adversaries. When he refers to his preference for a deal against no deal, he means a deal only on his government’s terms. Already, trade negotiations are commencing with America, existing EU trade agreements with other significant nations will be simply novated, and the whole of the Commonwealth, including populous India are ready to sign up.
This is the new reality and Dominic Cummings’s task is to ensure all government departments are firmly on message. There is bound to be a little drift from this black and white, but the process of political destruction now moves from London to Brussels. Having made such a fuss of it, the Irish border is a non-issue. The UK has no need to put in a border. With lower UK tariffs, ownership of the problem is fully transferred to the EU and the Irish government.
Assuming the Treasury has already made provisions for it, Boris needs the £39bn promised by Mrs May to the EU to be reallocated to a mixture of the health service, education, law enforcement and tax cuts. Then there’s that infamous £350m per week, which was on the side of the Brexit bus. That was gross of the Thatcher rebate, so the actual figure is closer to £275m per week, and there was an amount within that spent in the UK under the EU’s sole direction. That left £181m in 2016, sent to Brussels for the privilege of EU membership, or £9.4bn per annum. How much of that can be diverted for funding government spending depends on the new government’s tariff policies. There is no doubt that from a purely economic point of view they should be removed in their entirety.
By not paying the planned £39bn divorce settlement and gaining the £9.4bn net annual payments to the EU, Johnson has some wriggle room when it comes to funding his spending plans and tax cuts. Without it, he will have to rely on inflationary financing, and hopefully there are enough wise heads in the cabinet to dissuade him from going down that road. Therefore, if only because of the money, the odds strongly favour a hardball approach on Brexit negotiations instead of compromise.
The EU’s problems are mounting
There is likely to be an important consequence, and that is a Johnson Brexit could trigger a mounting financial and ultimately political crisis in the European Union.
A study last year by Germany’s Halle Institute estimated a no-deal Brexit would cost 12,000 jobs in the UK, and 422,000 jobs in the other 27 EU members, of which 100,000 are in Germany and 50,000 in France.[i] Yesterday, Ireland’s central bank forecast a loss of up to 100,000 jobs in the medium term in Ireland alone, on a no-deal. Clearly, the EU’s negotiators risk losing the wholehearted support of its two largest post-Brexit paymasters and others. But for Brussels, giving in on Brexit encourages rebellion from disaffected populations in other member states. Rather like the Soviets ruling Eastern Europe in the late eighties, the Brussels establishment finds itself struggling to keep its non-democratic political model intact.
It is increasingly likely Brussels will find events are spinning out of its control. For the UK, this introduces collateral damage, necessitating even more urgent separation from the EU. In a paper published at end-June, Bob Lyddon points out that a Eurozone financial crisis (which is becoming increasingly likely, as argued below) could cause the UK’s contingent liability as an EU member to be as much as €441bn. “This derives from the near-criminal irresponsibility by the UK’s negotiators”.[ii]
Whatever the numbers, there can be no doubt that this is an extremely serious issue. Furthermore, in the event of a financial and systemic crisis in the Eurozone, the UK will face its own crisis, if only because of cross-liabilities through the two banking systems. And the cyclical economic downturn that always follows the failure of a period of credit expansion is coming up on the inside rail very rapidly.
The EU economy is left badly unbalanced, with Germany dominating production and exports. Other populous member states, notably in the Club Med and France, are in a financial mess. They have relied on Germany’s production to provide for their unproductive profligacy. Her production output is now contracting.
Germany has been hit by three adverse developments at the same time. There is President Trump’s tariff war against China, which has undermined Germany’s largest growing markets at the eastern end of the Silk Road, and the threat he will deploy similar tactics against Germany. There is EU environmental legislation, which is making Germany’s motor production obsolete and forcing manufacturers to put a time-limit on existing production while investing enormous sums in electric technology. The damage this has done extends down the whole production chain, undermining the Mittelstand.
Then there is the crisis in Germany’s major banks, most publicly seen in Deutsche Bank because of longtail liabilities from its investment banking division. But all German banks, as well as those throughout the EU, face a lethal combination of margin compression from negative interest rates and a legacy of an expensive branch network when customers are migrating to online banking. The slump in German production now provides an additional threat to their loan books.
In the background, there is the turn in the global credit cycle from its expansionary phase into a periodic contraction, usually resulting in a credit crisis. To understand the transition from credit expansion to a tendency for it to contract is to recognise that the expansion of credit as a means of stimulating an economy depends on tricking economic actors into believing prospects are improving. When the evidence mounts that they are not, monetary stimulation fails, and credit begins to contract. Despite the ECB maintaining negative interest rates, despite the ability of highly-rated companies to raise finance at zero or even negative rates, and despite the ECB’s offer to pay companies to borrow (which is what deeper negative rates amount to) economic actors are now aware that it is all deception.
This is why Germany now has all the appearances of being in the early stages of a deepening economic slump, and there is nothing monetary policy can do about it. Brexit will simply add to these problems, not just for manufacturers, but for their bankers as well, as the Halle Institute report implies.
It is increasingly difficult to see how with escalating budget deficits in member governments Brussels can afford to continue with its head-in-the-sand approach to trade negotiations with Britain. The eurocrats naturally retreat into more protectionism when they see the system threatened. But asking Germany, France, the Netherlands, Austria, Finland, Sweden and Denmark for more money when their tax revenues are slumping is unlikely to cut much ice.
The new Johnson team will know some of this. There may be a temptation to make a portion of the £39bn, promised by Mrs May, available to Brussels to alleviate their pain in return for a quick deal. This goes against the new hard attitude of the Johnson government, exemplified by the presence of Dominic Cummings. But we shall see how this one pans out.
The UK economy Post-Brexit
Meanwhile, as economist Patrick Minford recently pointed out, a US-UK trade deal could lower prices of goods in the UK by as much as 20%, being the effect of EU tariff protection against global competition, raising prices above the world price level by that amount. [iii] Minford estimates a UK-US trade deal would lead to an overall gain to UK GDP of between four and eight per cent, a markedly different outcome from the project fear propaganda of the old establishment. And in the event of No Deal with the EU, the UK Treasury will receive up to £13bn in tariffs from EU importers, assuming no reduction in EU imports. Obviously, there will be substitution of EU goods for goods from the US and elsewhere, once trade agreements are in place, so this will be a maximum revenue figure.
The point is No Deal is not the disaster promised by the May establishment and its business lobbyists. It is a disaster for the remaining EU. Exiting the EU offers the Johnson government a good start, a clean sheet. Any compromise with the EU on trade and money detracts from this benefit.
It is an opportunity for Britain to reset the approach to political economy, which is our next topic. For attention-deficit politicians, there are two important factors to understand that are central to formulating post-Brexit policy: the reason why trade imbalances arise, and therefore how trade and economic policies should be constructed, and the destructive effects of inflationary financing.
How trade imbalances arise
It is vital to understand the source of trade imbalances, so that the mistake made by President Trump, which is driving the world into a Smoot-Hawley-style 1930s slump, is not repeated by Britain. The common error is to believe that the exchange rate sets trade surpluses and deficits. It therefore follows, the argument goes, that artificially raising the price of imported goods by imposing tariffs achieves the same effect.
The simplest explanation to understand why this is wrong is to start with a theoretical sound money example before progressing to the current fiat money environment. When gold was money and if unbacked currency and credit were not available, imports could only be paid for in gold or fully-backed gold substitutes. The same is true of exports. An individual borrowing to buy an imported good has to source gold or a fully-backed gold substitute, so the provider of money has to defer consumption, which includes that of imported goods. And unless the people in a nation collectively adjust the amount of gold in circulation, imports will always balance exports.
Compare this with nations trading with each other using unbacked state-issued currencies. These are issued at will by central banks as new money and by commercial banks in the form of bank credit. Therefore, anyone can buy an imported good without having to have the money, so long as a bank advances the credit.
Money and Credit expanded out of thin air replaces the need for imports to be paid for by exports. Now that all countries work their currencies the same way, the trade balance becomes a relative matter. Other things being equal, the country which expands its money and credit the greatest ends up with the largest trade deficit, and the one that expands the least the largest trade surplus.
But national statistics are designed to reflect money spent on consumption (GDP) separating out money spent on capital items. A nation whose population has a savings habit will spend less on imported consumer goods than a nation with a lower tendency to save. This is why Japan’s monetary expansion has not fuelled a trade deficit in consumer goods. In other nations, such as the US and UK, where personal savings are now minimal, credit expansion leads to chronic trade deficits.
The expansion of fiat money to bridge the gap between tax revenue and government spending similarly leads to a rise in imports, because the expansion of money and credit, when they are not saved by the consumers who ultimately benefit, always ends up fuelling consumer imports, often as a second or third order event. This gives rise to the twin deficit phenomenon commonly observed in both the UK and US, where consumer savings are virtually non-existent.
The destruction arising from inflationary financing
The Keynesian policy of stimulating an economy through a temporary budget deficit relied on deceiving economic actors into thinking there was more demand in the economy than existed. Like all confidence tricks, it eventually fails. Governments end up with perpetual budget deficits, which trend larger with every unresolved credit cycle.
Expanding money and credit as a means of funding government spending through the creation of debt has now become central to state finances everywhere, including the UK. The advantage for governments is very few people understand that this form of finance transfers wealth from the producers in an economy to the state. But the government is eating its own seed-corn by impoverishing its tax base, which if continued leads inexorably towards the destruction of its currency.
Any politician who claims to be a free-marketeer is not one unless sound money, devoid of inflationary financing, is embraced. Taking into account the importance of sound money and the reasons trade imbalances arise, a Johnson government that understands these issues will be equipped to fashion economic and monetary policy for the future. It is not enough to merely pay lip service to the necessary objectives, but to grasp the economic theory behind them, so that socialist and neo-Keynesian claptrap can be fully exposed in reasoned debate.
These are two objectives to strive towards, and will necessarily take time, because changes in government policy must steer the electorate along with it. They should be pinned up as mission statements on the notice boards in Downing Street. That being accepted, the following supporting policies must be implemented to re-orientate the ship of state towards economic success:
Tax policy. Tax cuts should be broadly financed by reductions in government spending, not through increasing the budget deficit in the hope that the economic stimulus will generate higher taxes. Welfare must only support people in genuine need, not those with just a sense of entitlement.
Government spending. Means must be found to reduce the proportion of government spending in the economy as a whole, to reduce the burden on the productive private sector. A financial and economic crisis requires departmental spending to be slashed, not just future planned increases cut, as was the case under Gordon Brown in 2009.
Encouragement to save. Taxes should be removed from savings and capital gains. Inheritance tax must be abolished. This is to allow people to accumulate personal wealth and to reduce the need for the state to provide.
Trade. Trade agreements with other nations should be viewed as a first step towards wholly free trade. By exploiting the comparative advantage of allowing people to buy what they want from providers of goods and services irrespective of location, capital resources will naturally be redeployed towards their more efficient use. This is why understanding that trade imbalances do not arise from currency differentials is so important.
Monetary policy. Steps must be taken to restrict the Bank of England from manipulating the economy through monetary policy. Targeting inflation and employment must be abandoned, and markets allowed to set interest rates. Credit expansion should be curtailed by ensuring that UK banks and branches of foreign banks operate to stricter capital rules. Goal-seeking stress-testing must end. In the longer-term, banks should lose the protection of limited liability, which has allowed bankers to make rash lending decisions without bearing the ultimate cost.
Gold. The Treasury must replenish the nation’s gold reserves. The risk of a global currency crisis is increasing by the day, and foreign currency reserves will need to be reallocated at least in line with those of other major nations.
Brexit is an opportunity to reset economic, monetary and trade policies. The implications of getting rid of the EU millstone go far beyond the leaving date of 31 October. Assuming a Johnson government has a good grasp of why free trade benefits the economy and why trade imbalances exist, combined with the courage to steer Britain towards the long-term prosperity offered by free markets, it will derive its future power from a strong economy instead of merely claiming it based on the past.
Bank of International Settlements ( The central Bank of central Banks) report recently said this:
“A 0% risk weight will apply to (i) cash owned and held at the bank or in transit; and (ii) gold bullion held at the bank or held in another bank on an allocated basis, to the extent the gold bullion assets are backed by gold bullion liabilities. ” BIS on Basel III
Previously Gold Bullion had a 50% risk weighting meaning if a bank held 100 million dollars in Gold Bullion in their vault they could only show $50 million in gold assets on their balance sheet.
This will now encourage banks and central banks to own and store much more gold bullion. The Perth mint reported recently that they have seen a doubling of central bank purchasing last year from their supplies.
There is an accepted practice that investors should have about 5-10% of their investment portfolio in precious metals like gold and silver. But recently Silver Doctors podcast it was reported by Jeffrey Christian and the CPM Group that number is quite higher.
In late 2016, Jeff and his firm re-ran those numbers in a backtest from about 1968 to late 2016. What they found was if you took a portfolio of 50% S&P and 50% T-bills and you added gold to it in 5% increments, the optimal gold allocation was actually about 27% to 30% gold depending on whether you used T-bills or T-bonds respectively.
On that same podcast it was reported by Jeff that gold producers are now holding back on about 20% of their annual production in order to start storing the bullion they mine in anticipation that the pricing will go up.
In Australia Gold has gone up on average over 20-30 years about 10% per year. The moment Gold passes $1360 USD then it will have broken a very important trading trend line and most are expecting Gold to enter another long term upward trend.
This was a FBI investigation! CNBC says “13-year J.P. Morgan veteran, said that he learned how to manipulate prices from more senior traders and that his supervisors at the firm knew of his actions”
“As part of his plea, Edmonds admitted that from approximately 2009 through 2015, he conspired with other precious metals traders at the Bank to manipulate the markets for gold, silver, platinum and palladium futures contracts traded on the New York Mercantile Exchange Inc. (NYMEX) and Commodity Exchange Inc. (COMEX), which are commodities exchanges operated by CME Group Inc.”
Recently a group of Australian indigenous and non-indigenous leaders met with the Head of the Ministry of Foreign Affairs and with the Office of the President of Israel. The purpose was to declare their support to the State of Israel and to show that support by giving some personal gifts and a scroll that was signed by a number of aboriginal elders, land owners and individual people who love the Jewish people.
There is an ancient scripture that was given to Abraham by God that says “I will bless those who bless you and curse those who treat you with contempt” Genesis 12:3.
We believe God has chosen to bless the world through the Jewish people and through all those who love and follow the commandments.
Does the recent US Solar Eclipse have an important significance?
You be the judge.
The eclipse will produce a 67-mile-wide path across America; 1967 was the year Israel regained Judea, Samaria and East Jerusalem. The property lines are often called the pre-67 lines in peace talks.
The maximum level of eclipse coverage will be over Washington, DC at 2:42 PM (about 81 percent). UN Resolution 242 calls for Israel to give up land for an Arab state that is Judea, Samaria and East Jerusalem. The resolution is the foundation for the peace talks.
The suns will set in Jerusalem at the time the eclipse’s shadow of totality arrives in Oregon on August 21.
The exact surface temperature of the sun is 5778 Kelvin – the Jewish Calendar is currently in the year 5777 and ends in 1 month on Rosh Hashana on sunset 20th Sept 2017, and it becomes 5778.
The eclipse line divides the land of the US; the Israeli-Palestinian peace process calls for the land of Israel to be divided
The paths of the August 21, 2017 and April 8, 2024 total solar eclipses create a huge X, with a phase of totality of 9000 square miles the size of New Jersey. Israel is often said to be the size of New Jersey.
In 1914 0n 21st August a Total Solar eclipse travelled across Europe, only 23 days earlier the First World War began in Europe.
Acts 2:19 “I will show wonders in the heavens above and signs on the earth below”
Do these facts have any significance – you be the judge!
On the 7th December 2014 the Australian Treasury Department released the “Financial System Report”.
It is a 320 page document that covers many aspects of the Australian financial system and the objective according to the report was to:
“…examine how the financial system could be positioned to best meet Australia’s evolving needs and support Australia’s economic growth. Recommendations will be made that foster an efficient, competitive and flexible financial system, consistent with financial stability, prudence, public confidence and capacity to meet the needs of users.”
The word “Bail in” is used 15 times in the document – but is seems to indicate that the report is not proposing “Bail in” for depositors and reminds the reader that depositors are covered by insurance up to $250,000.
“The Inquiry strongly supports continuing the current Australian framework in which deposits are protected through an explicit guarantee under the FCS, supported by depositor preference. The Inquiry specifically does not recommend the bail-in of deposits” Page 146
Re-Digging the Wells of Revival: Dutch Sheets’ Visits to Cane Ridge and Wales
Scripture makes it clear that the Lord accomplishes His purposes on the earth not through one man or movement, but through the labors and legacy of many across multiple generations (Heb. 11:39-12:2). Working through a divine timeline that extends beyond a single lifetime, the Lord desires that we honor and build upon the foundations laid by those who have gone before us.
In Genesis 26, we are told that when Isaac dug water wells, he didn’t get to start with his own. Isaac recognized his hereditary right and responsibility to re-dig and restore the ancient wells of his father Abraham, which the Philistines stopped up after he died.
It was after re-digging his father’s wells that that the Lord appeared to Isaac and pronounced over him the same blessing previously spoken over Abraham. Not long after that, the Lord allowed Isaac’s servants to unearth his very own well.
I have spent more than a decade of my life teaching about the synergy of the ages; exhorting believers that in order for us to move forward in fulfilling God’s purposes for our generation, we must reach back to remember, honor and add to what He has done through previous generations. Through a recent sequence of events, however, the Lord once again invited me to tap into some historic wells of revival in order to release a fresh river of His glory to flow into our generation.
A few months ago, I was invited to minister at a small log cabin-style church in Kentucky, which happens to be the site of the historic Cane Ridge Revival of the late 1800s. During that powerful move of the Holy Spirit, tens of thousands of people came by wagon to the hillsides of Kentucky, hungry to hear the preaching of the Word and bask in the glory of God for days at a time. At these camp meetings, it was common to see dozens of ministers preaching simultaneously across the countryside, while multitudes were strewn along the ground, being moved upon by the extremely weighty presence of God. This revival swept through the southern states and beyond, helping to birth the Second Great Awakening! I found it most interesting that the Lord set up my itinerary in such a way that from Cane Ridge, He sent me to Wales—another extremely significant site of revival history!
Moving From Well to Well
The nation of Wales is the place where revivalist Evan Roberts was baptized in the fire of God and commissioned by the Lord as a leader in the world-reaching Welsh Revival of the early 1900s. So many people were radically saved in that spiritual outpouring, that the nation of Wales experienced societal transformation. Judges had no cases to try, and law enforcement officials had no crime to deal with, so they formed traveling evangelistic singing groups!
The presence of God was so strong among the common people that pubs closed down, sporting events were cancelled, thousands of depressed and drunken miners came to Jesus, and hundreds left everything behind to give their lives on the foreign mission field. It is believed that since the 1900s, there has never been a revival in world history that cannot trace its roots back to the nation-shaking Welsh Revival.
Wales was also home to Rees Howells, another significant contributor to revival history. His life of intercession, chronicled in the biography, Rees Howells Intercessor, has greatly influenced many people and movements of prayer, myself included. After being powerfully swept into the Welsh Revival, this former miner-turned-missionary devoted the rest of his life to serving the purposes of God for his generation—in the place of prayer.
In 1924 Howells founded The Bible College of Wales to train others in what the Lord had taught him. That place soon became a house of prayer for all nations, with students and staff joining Howells in fighting world battles on their knees. What transpired on that small campus unquestionably affected the course of world history, and has left a legacy of prayer that the Lord is inviting us to lay hold of today.
Fighting the Battles of the Kingdom
Howells’ intercessors prayed all through World War II, engaging in the spiritual warfare necessary to take down the demonic powers encroaching upon the governments of nations through the dictatorial leadership of men like Hitler, Stalin and Mussolini. They also prayed fervently through the 1948 U.N.-mandated vote on Israel’s status as a nation. Even after Howells’ passing, their ardent intercession continued under the leadership of his son, Samuel. They prayed through the Cuban missile crises, the Cold War between the U.S. and the USSR, and also helped pray in the signs and wonders movement of the 1940s, 1950s and 1960s.
Their story could be likened to Moses’ hilltop intercession affecting Joshua’s frontline battle. Scripture states that as long as Moses held up the staff of God in his hand, Joshua and Israel prevailed, but when Moses let his hands down, the enemy prevailed. Through this prophetic act of intercession—lifting up the rod, which represented the authority and power of God—the Lord faithfully responded by releasing victory on the battlefield (Ex. 17:8-16.) Likewise, Howells and his intercessors continually “held up” spiritual authority in the heavenly realms while soldiers experienced miraculous breakthroughs, enabling them to execute victory on the battlefield.
During WWII in particular, God would give Howells prophetic insight concerning what was going to happen next and where they needed to strategically focus their intercession. After class each day, these devoted intercessors would contend in travailing prayer for hours and hours on end, sometimes praying through the night. They were determined to match in the spirit realm, the level of intensity and self-sacrifice experienced by heads of nations and soldiers on the frontlines of battle.
Impassioned about fulfilling their godly calling, Howells said, “If I am not called up to fight, and I know another way to help them and I don’t do it, I ought to be killed instead of them. They are facing death … for you and me. If they suffer more than we suffer for them, it will be our lifelong shame.” Howells and his students gave their lives to fighting the battles spiritually as if they were called to the frontlines of the war. With each new assignment, these hidden intercessors prevailed in their prayers, and the world marveled and breathed heavy sighs of relief at such dramatic turnarounds.
Re-Digging a Well
Despite the rich revival history at The Bible College of Wales, this spiritual well had fallen into disrepair. After the death of Howells’ son, Samuel, the directors of the school found it too costly to maintain the campus and keep the school running. For decades, the property went further into decay and was about to be sold to a developer for housing.
The Lord, however, had other plans and saw to it that this spiritual well was preserved and unstopped. He moved upon the heart of a pastor from Singapore, who not only caught God’s vision for restoring that place but also was willing to pay the price to make it happen. This pastor raised $10 million to purchase and restore the historic Bible College of Wales so that people from around the world could drink from this well of revival once again!
As a student of revival history, a teacher on intercession, and one called to awaken this nation to the purposes of God through prayer, it has always been a great desire of my heart to visit Wales and drink from its spiritual wells. Right after my time of ministry at Cane Ridge, I had the great honor of not only visiting the Bible College of Wales, but also serving as a key participant in the rededication ceremony for this historic well of revival.
During our stay at the Bible College, Ceci and I were assigned to the room of Rees’ son, Samuel Howells. This room sits directly above the prayer room where decades of nation-changing prophetic intercession took place—what a privilege! Among the gathering of key leaders from around the world, I was also extended the honor of rededicating Howells’ Ebenezer stone of remembrance (1 Sam. 7:12).
Similar to what the prophet Samuel did to commemorate Israel’s victory against their enemies, Howells set up a huge stone as a continual reminder of the Lord’s providence and provision. Inscribed on one side of its marble top is the phrase, “Faith Is Substance.” On the other side, the words, “Jehovah Jireh.” When, as part of the rededication ceremony, this remembrance stone was relocated to the center of the campus and anointing oil was poured upon it, we could sense the glory of the Lord.
In that very holy moment, God met with me in a powerful way. I was overcome with the Lord’s kindness at gathering us all to this place to drink from this historic well. In that moment, I pledged to help carry on Howells’ legacy of prayer and recommitted my life to raising up a movement of prayer to take out the giants of our day and usher in a Third Great Awakening.
The rededication ceremony at the Bible College was not the only special appointment the Lord had planned for me. The same Singaporean leaders that restored Howells’ campus also purchased the little church in Wales where revivalist Evan Roberts met with God.
During the renovation process for converting that church into a house of prayer, the original Bible used by Evan Roberts during the Welsh Revival was found sitting under decades of dust on the pulpit of the church! I marveled at this find. You can see the Bible and the remembrance stone among the pictures below.
Paying the Price
I am so grateful for the Singaporeans who accepted the Lord’s invitation to take on the extremely costly and painstaking restoration of this well of revival history. But the investment required for releasing God’s river of revival into the nations of the earth doesn’t end with restored facilities.
God desires to raise up Roberts-like revivalists and bands of Howells-like intercessors through which He can release a greater awakening and shift the course of nations today. This will require a high level of commitment. These men were so powerfully used of God because they complied with the great extremes God required of them. This is a principle repeatedly seen in Scripture.
As I prayer walked the grounds of the Bible College of Wales, while I communed with the Lord in the church where Evan Roberts met with God, and even now, I hear Holy Spirit asking, “Who will pay the price in this generation?” God used Howells and his intercessors to contend against and defeat the demonic powers and principalities trying to take over the world.
Today, the goliaths of Islam, communism, human trafficking, abortion and the sexual rights agenda are standing at our door. Never has there been more at stake. We need the same warrior spirit of Howells’ era to arise in us—both in the place of prayer and in being a prophetic voice. No doubt, God has a plan. He always does something great in the face of the impossible!
I believe the Lord allowed for the restoration of these spiritual wells in Wales because He is releasing a spirit of contending prayer and revival into the nations of the earth once again. I believe we will see a new momentum of intercession—appealing to heaven and fighting kingdom battles on our knees, until the greatest Great Awakening the world has ever seen occurs.
You are a part of this! There is a spiritual inheritance available to you. Young people, especially, it is your time to arise! The Lord is anointing you to overthrow the Goliaths of our day and contend for the destinies of nations. The Lord is searching for those who will say, “I will pay the price.” For those who invest their lives in these costly battles of intercession, He will show Himself strong! (See 2 Chronicles 16:9.)
Dutch Sheets is an internationally recognized teacher, conference speaker and author of The Power of Hope. He has written more than 20 books, translated into over 30 languages. His first work, Intercessory Prayer, sold nearly a million copies and is being used to empower believers worldwide for passionate prayer and societal transformation.
While the buzz has certainly picked up, the autonomous vehicle market is still underhyped. Next to the Internet, it’s the most profound and transformative technology innovation in our lifetimes. Most people predict it will be 20 years or more until true, level 4 or level 5 autonomous vehicles will be on the roads. But it’s going to happen much sooner. As I shared on stage at the Web Summit this morning, here are the 10 reasons why I believe level 4 or 5 autonomy will be widespread within the next 5-10 years:
Better for the environment: with fewer cars on the road, nearly all of them electric, pollution from cars will drastically decrease.
Less congestion: our cities are locked-up with traffic congestion, making it tough to get around. Autonomous vehicles will decrease the traffic congestion with more predictable transit, fewer vehicles, and no need to find that elusive parking spot.
More productive society: instead of sitting behind the wheel on increasingly lengthy daily commutes, we will be able to rest, work, and relax. This will increase productivity, while decreasing stress and road rage.
Inclusive transit for everyone: autonomous vehicles will be safer for our aging population, allowing seniors to retain independence longer, as well as more accessible for blind, deaf, and other individuals who couldn’t otherwise drive.
More affordable: the need for car ownership will be greatly reduced as more people take advantage of ride- and car-sharing, decreasing the amount of money spent on vehicles, insurance, registration, and maintenance.
The technology is improving: the cost of hardware is dropping rapidly, so component pieces integral to autonomous driving such as LIDARs and cameras are more accessible. More engineers are developing expertise in related fields, creating better software and hardware.
In August 1904 Torrey held a service in the city of Cardiff Wales that resulted in many salvations. Only two month later Evan Roberts held his famous prayer meeting in Moriah Calvinistic Methodist Chapel
66-68 Glebe Road Loughor Wales only a few miles from Cardiff. The Welsh revival began sweeping 100,000 people into the Kingdom and the society was dramatically changed. See http://www.moriahchapel.org.uk/index.php?page=1904-revival
It has become clear in the last few years that the western media is controlled and owned by globalist leaders who have a hidden agenda.
The truth about what is really happening in Syria and the world is opposite to what we hear on the nightly news. Sadly we are all subject to well crafted propaganda designed to promote the agenda of the ruling class.
Is that conspiracy theory? After doing extensive research on the global financial system and the philosophies of many of the leading economic and political institutions in the world since the 2008 GFC- I have come to realize that the TRUTH has been hidden on purpose.
These three video’s will give you a little glimpse of what is happening. Maybe when the Snowdon feature film is released we will learn a little more? Read more on these issues at this website. Alan
Why Everything You Hear About Aleppo Is Wrong- Vanessa Beeley
I am hearing that there could be another serious financial correction coming before during October 2016.
Harry Dent in his Sept 2015 book called “What to do when the Bubble Pops” has some concerning and informative research. Plus many Youtube stories and now more main stream outlets are saying there is a serious correction or worse coming soon . It does concern me that so many are now using alarming news reports and headlines in order to try to sell their newsletters/books and seminars.
There some important facts and trends appearing – these are the facts:
According to Harry Dent the world is facing some serious ageing demographics (Baby Boomers) that will cause major downturns in many industries – and this is one major reason causing the economic concerns globally.
Alan Greenspan has recently come out sounding a warning about the ageing baby boomer trend and that Governments especially in the US are not focusing on the issue, which according to Greenspan – if its not addressed will cause serious economic problems.
APRA – Australia financial regulator has released a report sounding a warning that Australian Banks are at serious risk because of the high private debt levels in average families who have mortgages. The private debt levels are higher than back in 2008, so if another GFC hits jobs then there will be a quick and significant level of mortgage defaults that might bring down a few major banks.
The China stock market is currently down 42% from its past highs, and the Chinese slow down has already been hurting Australian Industry and could have more serious effects in Australia – especially if China continues to slow. Dent believes China will have a major ongoing downward corrections because of all the Malinvestment.
Retired US Congressman Ron Paul – is warning the world that the US Government is getting ready to confiscate large portions of it’s citizens assets, in particular the 7 Tillion Dollars of private super/retirement funds in order to prop up the Government and the Banking system.
China and other BRIC’s countries have been buying up large amounts of gold with the possible plan to establish a new reserve currency – The Chinese Yuan Renminbi will be added to the United Nations/IMF- SDR (Special Drawing Rights) currency on October 1st 2016.
All G20 nations are committed to giving their banking system the ability to legally “Bail in” or recapitalize the failing banks with the savings of their depositors.
The counties that need close attention right now are bond markets in Spain and Italy as they are the next canary in the mine.
Oxfam UK released a report in Jan 2016 about what has been happening in the world economy as it relates to financial inequality. I am not a socialist but when you hear that “62 people own as much as the poorest half of the world’s population” and 1% of the world’s population owns more 99% of the worlds wealth you realize we have a real problem!
Is it any wonder that Donald Trump is getting so much support from the common man. It’s because the average wage earner and small business owner is waking up that the system is rigged and that a very small % of wealthy elite – eg 62 people are getting control of the world and the peoples governments in every nation.
When this happened in France in 1789 the people revolted in the French Revolution. Now it looks like its a global phenomenon.
When not one top banking executive has been jailed because of all the corruption exposed during the 2007-8 GFC – it is now obvious that not only are the big banks do big to fail they are now do big to prosecute!
If there is another GFC the Banks now have legal authority to take depositors money (Bail in) to recapitalize their balance sheets.
Its time we move away from what seems a like a Death Economy towards a Life economy. A Preferred Economy that is gives back hope of a better future for all.
If you want to check out the Oxfam report click here www.oxfam.org
Alfred Deakin was Australia’s 2nd Prime Minister who was also the nation’s founding father! Australian’s know very little about the man who served his nation so faithfully, with such dedication and humility that even his political enemies loved and admired him.
He established the Australian High Court; he was the founder of the Navy and pioneered many of Australia’s foundations. He worked tirelessly towards seeing the unification of the Australian colonies into a great federation and made Australia one nation. In the first Federal government he was Attorney General and Edmund Barton’s right hand man. Serving as Prime Minister for 3 terms, his Government passed more than 17 critical pieces of legislation and provided important national stability in a very chaotic unstable period.
He was one of the world’s greatest orators of his time, extremely literate; he read 100 books (in English and French) every year for much of his life. Few people understood where his incredible energy, humility and character came from, but the secret was his prayer life.
He wrote down 400 prayers in a small private journal and within these pages are words of profound insight, humility and desire to know the will of God and a desire to be filled with Gods spirit so he could be empowered to serve his nation.
He saw Heaven and heard Gods voice speak to him. Deakin was coming home late one night from Parliament, to his house in South Yarra that was one block from Melbourne botanical gardens – it was just after he lost the election in April 1910 and he was feeling jaded and his nerves were on edge. It was then he heard a voice saying to him, in a pleasant, cheerful and a colloquial tone “Finish your job and turn in” Deakin said ” as if it had come by telegram or cable from afar, but from a living sender much better informed, of far wider outlook and deeper insight and higher authority than my own reflections supply”