thought seems unrealistic to people because it’s what we use every day.
But the money we use is entirely reliant on government and its central
bank. If their performance does not meet the criteria required by money
then confidence in that money will collapse eventually. It’s clear that
all currencies are not performing well at the moment as the balance
sheet of most nations (except China) gets weaker and weaker. If most
nations were individuals, then they would have been bankrupted by now.
look back in history shows that not one paper currency system has
lasted throughout the centuries, with the exception of those based
solely on gold and silver which remain as money assets all the way.
today, you may well answer! We say oh, yes, today too. Despite all the
rhetoric since 1971 gold remains in the bulk of the world’s leading
reserves for that rainy day when something else is needed other than the
currency issued by the nation’s central bank.
How Does Money Collapse?
back at Argentina in the 1990’s and you see it using the U.S. dollar,
but the economy of Argentina could not support the use of the dollar so
it reverted to the Peso after savaging its citizen’s dollar savings in
exchange for that Peso. That was a ‘collapse’ of their currency. If the
Greeks return to the Drachma or the Spanish the Peseta, we will see a
similar scene; it will be a collapse of their currency (the euro) inside
the dollar collapse? Because it’s a government-controlled money system,
the dollar will remain the means of exchange it is, even in a collapse.
A collapse will be expressed in several ways:
exchange rate against other currencies can fall heavily. In the case of
the dollar as the world’s foundation, un-backed currency, this is
unlikely as it supports the un-backed currencies across the world
indirectly. Its trading partners will try to pull their currencies down
with it so as to protect their trading with the U.S. The same applies to
a greater or lesser extent with the other main trading blocs of the
world such as the Eurozone and China. You will have noted the narrow
trading range of the € & the $ between $1.21 and $1.45 over the last
few years. This is because of the mutual support between the Fed and
the ECB by way of currency swaps.
can collapse inside the country, as its buying power declines rapidly.
This is monetary inflation usually caused by the over-issuance of a
form of collapse could include a bond market collapse where the markets
push interest rates up so high as to make it impossible for governments
to repay debt. This level is generally set at 7% and we have seen it in
the P.I.G.S. nations of the Eurozone over the last three years. If
these countries had separate currencies, they would have collapsed, but
inside the euro we see that that final collapse will be expressed by
exiting the Eurozone and returning to past currencies.
a nation where there is still a working economy, a collapse can also be
expressed by the imposition of Capital and Exchange Controls,
restricting the flows of money in and out of a country to protect the
capital inside its borders. Its citizens usually bear the brunt.
Can the Global Monetary System Collapse?
of the opinion that even if the system is hobbling along, it will
continue until global economies collapse. This was the case in Zimbabwe
in the last decade. The Zimbabwe dollar continued in use because the
government enforced its use inside its borders. But to all intents and
purposes, it has collapsed long before then. In the case of Zimbabwe,
the U.S. dollar became the currency in use in the country and in what’s
left of its economy. This is still the case today.
any such collapse occurs, we are certain that each individual developed
world economy would cooperate with each other to take whatever measures
are available to them to shore up the monetary system. These measures
will prevent the system from a total collapse, keeping it staggering on
all the way. We believe that they will fully harness gold then.