We all know several central banks are investigating the use of digital currencies. One of them is the European Central Bank. Its aim is to provide a safer and more efficient alternative to cash and cryptocurrencies. In this post, I will answer what is the digital euro and how it would work.
What is the Digital Euro
A digital euro would be the euro in a digital form. It would be produced and guaranteed by the European Central Bank. Also, it would be legal tender.
Reasons to Introduce the Digital Euro
-Due to the COVID-19 pandemic, electronic transactions have seen a significant surge as the general public tries to avoid paper money over fears they might spread the virus.
-The Europeans do not want to fall behind other digital currency producers such as Bitcoin and Facebook’s project Libra now called Diem.
-The digital euro could be an important tool in case of a natural disaster in case the “traditional payment services” collapse.
-Fintech institutions and cryptocurrencies could undermine the eurozone banks and the euro itself. Also, citizen’s finances are vulnerable to foreign powers and marketing companies, collecting data on their spending habits.
-The digital euro will assist the euro to become a key international currency
Digital Euro Public Consultation
There has been a public consultation regarding the digital euro’s introduction. More than 8,000 (8,221) participants actually responded with their own feedback. The ECB has made the results available to the public.
It is more than certain, that the ECB policymakers will go ahead and give the digital euro the green light. That could take place in the summer. It is expected for the whole project to eventuate within four years after its approval.
Digital Euro Pros
-All citizens including the homeless or those without a bank account will have access to a free or a low-cost bank account.
-The digital euro will ensure cash will retain its utility as a public payment system accessible to everyone.
-The digital euro will provide a secure integrated mechanism managed by the ECB
-Governments will maintain their seignorage income no matter what the future of physical cash will be.
-You won’t have to rely on banks FinTech companies and other intermediaries as technology will allow all payments and money transfers to be made in real-time directly from payment to the payee.
-The digital euro will increase competition between banks whose aim would be to attract cash.
-The digital euro could transform the existing problematic monetary policy and facilitate the implementation of helicopter money.
-The introduction of the digital euro could limit the ability of banks to generate money through credit and as a result, it reduces the possibility of a credit-fueled crisis.
-People’s finances will not be vulnerable to foreign powers and private companies collecting data on their spending habits.
-The digital euro will be another tool against crime, money laundering, and tax evasion.
Digital Euro Cons
-The digital euro introduction might lead to deposit runs and financial turbulence.
-Civil liberty activists worry the digital euro could be used by governments to spy on how and where their citizens spend their money.
-There could be a transfer of funds from the Eurozone banks to the ECB as people rush to open digital accounts at the ECB.
How Would the Digital Euro Work
The digital euro will be a useful addition to your wallet. You could use it as an alternative to plastic cash. You could pay your bills, do your shopping or even borrow from your friends and pay them back anytime, anywhere.
All this could be done through a wallet-like application stored in your smartphone. Digital euros will be guaranteed by the ECB and one digital euro will always be worth the same as a one euro coin.
In case you lose your smartphone your digital euros won’t be lost because the ECB will be keeping a record.
The crypto-euro will run transactions at a low cost. The ECB will be recording each transaction using blockchain technology.
Digital Euro Compared to Bitcoin and Other Cryptocurrencies
-Bitcoin is subject to price manipulation along with other cryptocurrencies while the digital euro will not be manipulated in any way.
-The digital euro will be a stable digital currency while Bitcoin never was and I do not think it will ever be.
-The digital euro would be a true 100% digital currency while cryptocurrencies are not real currencies.
-Fast transactions and payments with the digital euro, this is not the case with Bitcoin and other cryptocurrencies.
-The ECB will be backing and guaranteeing the digital euro contrary to Bitcoin and other cryptos where nobody guarantees or takes responsibility for anything.
-Bitcoin and other cryptos have been subject to theft and fraud. Theft and fraud would be difficult with the digital euro.
My Own Thoughts
The Money You Do Not Own
Right now people only have two options. To use private banks, or to hide their money under the mattress or some safe place at home. To make things worse, most people are unaware that the money in their bank accounts exists only as a number in a computer screen, and is by law the property of the bank. The bank owes that money to people but the money does not belong to them.
Why Governments Love to Print Money
Physical money, (coins and paper money) is created by central banks and is not tied to a particular obligation from a bank to individuals. In addition, when a central bank prints money it also creates an income for the state. That income is known as seigniorage. This is another reason why governments love to print money without taking a good look at the negative impact money printing has on the economy.
Cash is the Best Payment System
Cash is the only payment system that is accessible to everyone with or without a bank account and it is in every respect free of charge. The truth is that cash offers an important public utility service.
People do not use cash as much as they used to. The reality is, that there is a surge in payments made by credit cards, mobile applications, and cryptocurrencies. Digital technology enables us to make user-friendly payments.
That surge in financial technology poses a great threat to cash. Cash is becoming an endangered species and this is something we should avoid.
A Cashless Society Will Be a Mistake
Think this, if cash disappears then a few very powerful private companies will be in total control of the money system. These companies will monitor our transactions something I do not like.
Something else I do not like is that in a world without cash people will be trapped in our current banking system without having the option to get out. We need to use technology to redesign and improve our monetary system in a way that works for the public interest.
If the monetary system is to work for the public interest then surely it has to include money. There is nothing wrong with money, in fact, money is a public asset.
The move from central banks (ECB, China, Sweden, and so on) to introduce their own digital currencies is absolutely necessary. It will put an order in the cryptocurrency industry where there is a high volume of theft, scams, and other illegal activities. It will force them to improve their security and all that will benefit the consumers, you, and me.
Additionally, the introduction of the digital euro will shake the cryptocurrency world. Imagine a stable digital currency guaranteed by the ECB performing low-cost, secure, and fast transactions.
The digital euro will be exciting news, as it will actually benefit the economy and the consumers and it will also protect cash.
What do you think about the digital euro, would it work or not? Could it be better than Bitcoin and other cryptocurrencies or not? Feel free to leave a comment I always answer back.
I hope this article covered your question about what is the digital euro. If you have any queries do not hesitate to leave me a comment and I will get back to you.
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When I published that article, that was over a year ago, Bitcoin was rocking. However, there have been several disturbing and alarming facts that actually forced me to write this How Bitcoin is a Scam article. Unfortunately, it looks like all this is actually a fact and the huge Bitcoin price drop is proof of what the markets think about Bitcoin.
Bitcoin is on a roll right now. Its price has been breaking one record after the other. However, there is a question. Is Bitcoin a Scam and How Bitcoin is a Scam? Will bitcoin’s price plummet and when this is going to happen?
In this article, my aim is to answer all these questions by telling you the truth about bitcoin, and frankly, I do not care whether you like it or not, I feel it is my duty to let my audience know what I’ve discovered during my research.
I’ve always been sympathetic towards bitcoin and other altcoins. In fact, I think there must be something that could stop governments and central banks from manipulating monetary policy. Bitcoin seemed that it could actually take that role and become the alternative currency-asset, that protects the ordinary folk from government and central bank reckless monetary policies.
After the latest bitcoin price surge, I decided to investigate bitcoin and find out whether bitcoin is actually worth all the hype and expectations or not. Here is what I’ve discovered.
Bitcoin has Old Outdated Blockchain Technology
Bitcoin is the oldest cryptocurrency. At the time it was developed the technology behind it was breathtaking. It is a first-generation technology cryptocurrency.
Nonetheless, bitcoin’s first-generation technology compared to other crypto’s second and third-generation altcoin technology makes bitcoin stone-age crypto. Bitcoin can only handle transactions from one crypto wallet to another and that’s it. Bitcoin needs to innovate again otherwise it will be taken over by third-generation advanced altcoins.
Third-generation altcoins have addressed the famous Trilemma blockchain problem. The concept behind it is to improve scalability without suffering security and decentralization.
Bitcoin’s Huge Transaction Costs
The transaction costs behind bitcoin are enormous. At the moment the fee for a bitcoin transaction is $24,26. The result of this is that bitcoin is totally unsuited for everyday retail transactions. In addition, the proof of work technology does not allow more than five transactions per second whereas the visa network allows more than 24000 transactions per second.
Regardless of the huge transaction costs bitcoin is not a scalable means of payment for goods and services. It is mainly used for speculation and buying other cryptocurrencies. It is a self-service system.
Some argue that bitcoin is actually suited for the transfer of large amounts of money from one country to another. These types of transactions are under constant surveillance from authorities to stop tax evaders, human traffickers, criminals, and drug dealers from transferring large sums of money from one country to another.
There is a crackdown on these types of transactions and there is going to be a similar crackdown on international cryptocurrency transactions.
Bitcoin and Other Cryptocurrencies Are Not Assets
Investment assets like stocks, bonds, real estate, and so on, will give you income, dividends, rent, interest, and so on. Some of them will also provide a use. For example, commercial real estate will give you housing services.
Gold and other precious metals, do not give you an income but they have a use either in the industry, jewelry, monetary use, and store of value.
Bitcoin has no use, no income, and no utility. It is a pure speculative self-fulfilling bubble on price appreciation. They call it an asset but it does not have any of the features assets have. Additionally, it is not a currency because it cannot be used as currency. It is a self-fulfilling bubble with zero intrinsic value.
Bitcoin’s Unsustainable Energy Consumption
In order for the bitcoin network to deal with the everyday transactions and carry on the mining process, the amount of energy it consumes is equivalent to the energy Argentina consumes.
The whole mining process where a number of miners compete against each other with one of them winning the task of verifying the transaction which is an inefficient process that gets put in a ledger to be shared with the bitcoin computer network. This is an inefficient way to verify transactions.
In a normal financial system, there is a small number of individuals or institutions (banks, and so on) whose job is to validate, and verify transactions and make sure there is no double-spending.
If we take into account the huge energy consumption, and the inefficient transaction-mining process and add the carbon tax to it then, bitcoin’s value should be well below zero.
Bitcoin Price Manipulation
Unfortunately, there has been an orchestrated Bitcoin price manipulation operation. There have been allegations of pump and dump groups on Telegram who are pumping and dumping the price of it.
We are also aware of the tether issuance which has been bringing a billion dollars into Bitcoin almost every single day money coming out of nowhere. Sadly, it looks like Tether has been used to buy Bitcoin, and of course, all this is not backed by anything.
With negative interest rates and non-stop money-printing, there has been an abundance of money. The reality is that the financial system has been flooded with money. All that money went to the stock market and cryptocurrencies. Yes, the never-ending money-printing by the Fed helped the creation of the Bitcoin bubble. Nonetheless, right now there is a shortage of money affecting bitcoin.
Bitcoin is not a Decentralized Currency
This is another of the bitcoin myths. The reality is that 70% of Bitcoin mining is done by six mining firms based in Russia, Belarus, and China. This is an oligopoly. Russia, Belarus, and China are three countries where there is no rule of law and they are all strategic rivals to the United States.
This is not decentralization. True decentralization should apply to all Bitcoin operations. Decentralization in mining, in exchanges, in wealth, and in development. The vast majority of Bitcoin wealth is concentrated on a very small number of people and companies. I call it the bitcoin oligarchy.
Sadly Bitcoin has become a highly centralized system with a very small number of people owning it, controlling it, and manipulating it. All that goes on in countries where there is no rule of law.
What Bitcoin is, or What Bitcoin is Not
Bitcoin is not a currency, it is not a unit of account, it is not a scalable means of payment, it is not seen as a numeral, it is not a stable store of value and it is certainly not a hedge against risk. Some people still argue bitcoin is a hedge against risk. We did not see that during February and March last year when we had the collapse of global equity by 30% and 40%. At that time bitcoin went down 50% and other cryptocurrencies 60%.
The Ripple XRP Cryptocurrency Scam
A month ago Ripple, its chairman, and CEO were all sued by the US Securities and Exchange Commission. Allegedly they illegally marketed and sold securities worth $1,3 billion. According to SEC Ripple raised capital by selling XRP in an unregistered securities offering. In addition, Coinbase was also sued because knowingly sold XRP as unregistered security and on top of that gained commissions on these sales.
The Bitcoin Bubble
The bitcoin bubble is set to explode and many assets will suffer a big blow. There is going to be a bloodbath. This is because Bitcoin’s market capitalization is over $1,4 billion dollars. Back in 2018 during bitcoin’s previous collapse, from $20,000 to $3,000 bitcoin’s market capitalization was only at around $200 million.
I’ve always been sympathetic to Bitcoin. I thought it could become an alternative to fiat currency and change global payments forever. In the past bitcoin was the holy grail of cryptocurrencies, the number one. If Bitcoin collapses and if the ongoing investigations find price manipulation, and it looks like it will, I do not think Bitcoin will be able to recover again. What could also happen is that Bitcoin might take the whole cryptocurrency industry down.
Many people in the community are now wondering whether capitalism is still a healthy system, or whether it has changed for the worse, and whether capitalism faces its biggest crisis ever.
We are living in a world that can not survive without a constant budget deficit, can not survive without cash printing, can not survive without negative interest rates, there is something extremely rotten. In fact, we are living in a world that accumulates government and public debt, a world that gives us a false sense of fulfillment by spreading around worthless currency. Well, this world is not only rotten but also disgusting! Yes, it stinks of lies, deception as well as ethical decadence.
Capitalism Faces its Biggest Crisis Ever
Why does not anyone stand up to warn the community where we are heading? Well, for the straightforward reason that no politician can tell the truth. Since if they did, they wouldn’t be chosen. The principal function of any politician is to buy or obtain votes and as a result, they can never speak the facts.
Additionally, there are so many beneficial interests with endless rewards. The money men who regulate the monetary system have all to obtain, from developing false markets, false money, and false interest rates.
The Reality Never Dies
The Roman philosopher and also statesman Seneca said: “Veritas Nunquam Perit” (The Truth Never Perishes). That could very well hold however it can be suppressed for a very long time as we are seeing now all over the world.
Let us initially think about the greatest lie which is cash. For 5,000 years, the only genuine cash has been gold (and sometimes silver). Whenever the financial system has differed from that basic principle, by creating false money, it has finished in disaster for the world, whether that has been done with silver coins full of zinc or copper or by just printing paper money.
Complete Disaster of the Currency System to Follow
Which is where we are heading currently. A tragic course of events was triggered when Nixon closed the gold window on August 15th, 1971. Ever since international debt has taken off and also all money has imploded. Financial obligation, derivatives, and unfunded liabilities have gone from workable amounts in 1971 to over $2 quadrillion today. As well as every single money has shed 97-99% in actual terms.
We are currently at the point when we will certainly not be able to change the training course of either of the two. The environment is figured out by really long cycles that humans have no impact on. Now we just have to allow it to take its course which will be devastating for the whole world.
So why is nobody seeing what is taking place and why is nobody taking on the claim that the Emperor is completely naked?
The truth is unpleasant and painful yet it does never die.
It is an indisputable reality that essentially all the fiat cash that is printed by federal governments, central banks as well as commercial banks is pointless as well as for that reason incorrect.
If a federal government prints cash out of nothing to cover deficit spending, that cash has NO worth given since all the jobs needed to develop it was to push a button on a computer system.
We likewise recognize that the money has no worth because no financial institution or central financial institution is prepared to pay interest in deposit accounts. Instead, because cash is worthless, these bankers desire to be paid to hold the money. There is no reason to pay interest on worthless money.
There is an Abundance of Worthless Money
As well as when a financial institution receives a $1,000 down payment and after that lends out that very same cash 10 times or even more, that cash is likewise worthless, considering that it has set you back $0 to provide the funding.
It is the same with a credit card company or car funding, they all concern counterfeit money developed by the touch of a switch.
For the ones who don’t recognize what this implies, let me describe it. Allow us to begin with the bubble’s possession. When the worldwide stock, property, and also various other bubble asset markets stand out, all these properties will certainly lose a minimum of 95% of their value in actual terms. The best way to calculate real terms is certainly gold because that is the only cash that has actually survived and also preserved its purchasing power for hundreds of years.
And also, if we take a look at the financial obligation bubble, global financial debt goes to the very least $270 trillion. Yet when the financial obligation bubble stands out, so will other liabilities like the $1.5 quadrillion of derivatives. So when the financial obligation bubble pops, basically all that fiat money ends up being entirely useless. No person can repay it as well as no one wants to acquire it.
I recognize that the above two paragraphs are an extremely streamlined description of what will certainly take place over the coming years. However, this is the ugly truth.
These occasions will undoubtedly not take place in one go. They will certainly most probably begin with the securities market very first collapsing, which will certainly put pressure on credit score markets. A lot more QE will certainly adhere to yet that will just have a short-term impact. Even more collisions, even more, cash printing, the rising cost of living, devaluation, credit report defaults, company closures, and also bank defaults.
We had the first clear signals from numerous significant reserve banks, that something was rotten in the worldwide monetary system already in August, when the Fed, ECB, and BOJ all proclaimed that they would do what it required to sustain the system.
Quantitative Easing and Money Printing the Same
In September the Fed launched overnight Repos of $75 billion boosts to $100 billion. They additionally took on two-week Repos of $ 30 billion rising to $60 billion. Adhering to that the Fed has now announced that they will certainly start QE of $60 billion each month. We should not call it QE according to the Fed. So allow us to just call it money printing since that is what it is.
The President of the Minneapolis Fed stated: “This is not about changing the stance of monetary policy. This is about making sure markets are functioning. This is kind of just a plumbing issue.” He is right, it is a plumbing concern. However, the issue is that the economic system is leaking like a filter without the possibility of connecting all the openings.
Between the end of 2017 and also 2019 the Fed reduced its balance sheet by $700 billion from $4.5 trillion to $3.8 trillion. As always, the Fed has no idea whatsoever. The issue is that the system will not make it through with even more cash printing either.
Central Banks Introduced Unprecedented Economic Stimulus
The world’s largest central banks had no other option to fight the COVID-19-caused crisis than to introduce further economic stimulus amounting to trillions of dollars. It was the Fed and the US government first with the ECB-European commission next, and all the other major western economies and central banks to follow.
Yes, the system is rotten and is currently starting to smell. The activities by the central banks specifically in the last couple of weeks smell of panic. The problem with JP Morgan or the Financial Institution of America, the ECB, or possibly the Fed is supporting the bankrupt Deutsche Financial institution? We will most likely quickly learn where the greatest stress is.
On top of the bank issues, the company’s financial debt is obtaining riskier day by day. The financing of firms like We Work and Merlin, are clear indications of just how hazardous this market has ended up being.
Central banks are already trying to deal with the fires, but most people are not aware these fires exist. There is a concern whether the central banks will be able to contain these fires or whether they will spread like wildfires.
The Decadence Started in 1971
US financial debt back in 1971 was $400 billion versus $26 trillion today, a “plain” 55x boost. US GDP was $1.2 trillion in 1971 versus $26 trillion today. A 55x boost in US financial debt in the last 48 years has just generated a 17x boost in GDP.
The US economy is in trouble which is not surprising because the never-ending money printing of pointless paper money, can not create real growth and wealth whatsoever. Its only effect on the economy is to create a stock market bubble.
It is not just the US that is in this setting. Since taking away the gold support of the dollar in 1971, offered all countries an incentive to print money and increase credit.
The UK Example
I do keep in mind the beginning of the damage of money. Moving later on to the UK, I saw the pound collapse against the Swiss Franc from CHF 10 in 1972 to Swiss Franc or CHF 1.20 today, an 88% loss of the extra pound.
A period of economic mismanagement and political turmoil in the UK in the 1970s started it all. The annual rising cost of living was 15-17% for 7 years and interest rates got to over 20%.
The economic system was moments from breaking down in 2008 throughout the Great Financial Dilemma. Eleven years later on, worldwide financial debt has doubled and danger has increased greatly.
Central lenders are conscious that the global economic situation is currently standing at a crossroads. The course was laid by them many decades back and now there is no way back.
The US and the Gold Standard
August 2020 remains in many ways comparable to August 1971. America was at that time behind-the-scenes. The country was under pressure after the costly Vietnam battle, as well as the gold standard, which stopped the United States from cheating the system by printing cash. The remainder of the world saw the US’s precarious situation as well as began marketing bucks. To recover their position, Nixon saw no other way than to take the buck off the gold standard, and this was the start of 50 years of global cash printing, and also credit score growth on a humongous scale.
Nixon’s August 1971 choice has brought about a dilemma of extraordinary proportions. Still, most people can see that we are currently at the point of “a final and also total catastrophe of the currency system included” as von Mises stated.
This August is not one solitary event like in 1971 yet a variety of very clear indicators that all reserve banks are worrying about. Every major reserve bank is currently revealing a level of concern that is extraordinary. They are all telling us that there will certainly be unrestricted money publishing incorporated with no or negative interest rates. This will certainly not clear up half a century of reckless monetary mismanagement.
What Nixon started will now be finished off by current governments as well as main lenders in the most magnificent money printing bonanza, leading to hyperinflation as well as a collapse of the economic system.
Until now, over 40% of worldwide bonds currently generate less than 1% and over $16 trillion well worth of bonds have an unfavorable interest or negative interest.
Negative Interest Policy is Insane
A negative rate of interest prices is of course complete insanity. It will certainly come to be much more intriguing when home loan rates go to minus 25% so after a few years the financial obligation has been paid by the financial institution!
Us Rates to Decline Unless
95% of international bonds are now listed below the Federal Finances price. Since that rate is 2.5%, this is a short-lived scenario. US rates are likely to decline dramatically throughout the autumn to absolutely nothing unless the devastating results of the neverending money printing start to take place. That will cause a lower dollar and greater gold. US stocks will certainly decrease despite lower prices.
Lower rates are no longer seen by securities market financiers as helpful for markets as a sign of financial difficulty in advance.
Powel Trump and the US-China trade war
Fed Chief Powell simply stated that the “Economy is in a beneficial area”. You ask yourself where that area is, considering that there is nothing good regarding the United States economic climate currently. As well as it appears that Powell doesn’t think in his very own words given that in the same breath, he claims that there are “substantial threats”.
So the Tit for Tat video game between the US and also China proceeds and what is specific is that everybody is a loser in a trade battle. Trump won’t give in and neither will China. As they play their video games, the global economy will certainly suffer and so will a breakable global economic situation. Global trade is currently down and I am afraid things could get worse in the autumn.
Trump is most likely to win this video game over Powell. Trump has stated that rates need to drop by 1% now. Hence, we are assured to see a lot lower US rates and a rapidly falling buck throughout the fall.
Investors set to Suffer Big Losses
Regretfully 99% of investors will not understand that they need to be out of stocks and move into gold, till their wealth has been wiped out. All stock investors will believe that central banks will certainly support them once more. But as I have described, this time support will certainly fall short as we begin a secular bear market in stocks, and the global economic crisis will last a very long time as well as lead to massive wide-range destruction.
The End of Money Printing and Neverending Credit
That the global economic situation for the last 100 years was reliant on credit scores as well as printed cash, is not a new miracle paradigm but a sign of a diseased system. The never-ending credit and the constant printing of worthless money are about to end. In a corrupt way, it is virtually paradoxical that the trigger for finishing this sick financial system would certainly be a pandemic disease.
Social Discontent and Anger to Come
Currently, the world remains in a situation where all of those aspects will possibly come to pass. We already have the recession and also we have a condition. There is no significant famine yet however, this is most likely to come. Social discontent and conflict are possible repercussions of these troubles. Starving and angry people will stand against their leaders as well as against the elite. The differences in income, as well as the huge gap that separates the wealthy and the poor, have created an illogical scenario. This is basically without exception just how every change starts.
There is a lot of anger in the community. People aren’t happy at all. They are wondering what on earth is going on with their taxes, they are wondering why the money they earn is never enough, they are wondering why social inequalities have increased, they are wondering where all this abundance of (fake) money is going, and so on.
The Money that does not Exist
Central banks and governments are currently printing limitless amounts of cash to help small and also big organizations as well as individuals. It is a program terrific in that every person gets aid, but no one asks where is the money coming from.
No one stresses that THERE IS NO CASH. The $ 100s of billions as well as trillions that are being provided to the needy do not exist. They are just produced out of thin air. Because the situation started in the very early autumn of 2019 with the Repos, the Fed’s balance sheet has increased by practically $3 trillion to $6.5 T. Yet this is just the start. The forecast is that it will get to $9T in June as well as possibly $12T a couple of months later on.
What we have to keep in mind is that this situation did not start now, however, in 2006 the Fed’s annual report was $800K. By 2012 it had gone to $3T. In the following few months, the equilibrium sheet will certainly blow up by 3-4x to $12T.
In the present year, the US can quickly get to a shortage in unwanted of $4T, taking the financial debt to $ 28 T. If we just go back 3 months, who would certainly have thought a Fed equilibrium sheet reaching $12T as well as a US financial obligation of $28T? They don’t even do that because if they had, they would have known that the United States financial debt has doubled every 8 years because of 1981.
The United States is likely to have a debt of $40T in 2025 however, that number is most likely a low number. Then we are going to see failings not simply in the economy but also in the financial system. That is the danger the economic system is currently facing as well, as we are currently in a stage when the surprises will be much even worse than anybody can think of.
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Back to the Future
It all began with private lenders taking control of the financial system in 1913 when they established the Fed for their very own benefit. For practically 60 years their power grew slowly however, in 1971 when Nixon closed the gold window, all hell broke shed.
The United States currently begun what is currently 60 years of shortage investing. Every solitary year given that 1960, the United States is running at a loss. (deficit)
Because the main purpose of political leaders is to purchase votes, Nixon had no choice back in 1971. The United States had currently at that point been running a shortage for ten years. With a gold standard, it is necessary to run a sincere economic system without deficits. Or else you lose all your gold as well as the currency breaks down. Given that Nixon had no intent to run excess, he might not have been connected by a gold requirement and consequently abolished the gold backing of the dollar. The consequences were of course tragic as well as the dollar has actually fallen since.
Back then $33 could buy you an ounce of gold nowadays you need well over $1900. This is how much the dollar has depreciated.
Considering that the US began running deficits 60 years ago, total United States debt has actually gone from $800 billion to $26 trillion today. What we are seeing is a fantasy world all built on financial debt, federal, state, customer, home mortgage, car, trainee, and so on. The checklist is limitless just how to produce phony wealth simply based on the financial obligation.
The US is currently coming back to reality which will certainly be the biggest shock. The trillions of fake cash and fake assets will now implode and so will certainly the US economy.
What the world has experienced in the last 100 years is fake capitalism. It more looks like Voodoo capitalism. Central bankers, led by the Fed, have successfully taken on Mayer Amschel Rothschild’s philosophy: “Permit me to issue and control the money of a nation, and I care not who makes its laws.”
By doing this, they have placed a spell on the international economic system as well as lumbering it with debt that might never be paid back. They are instrumental in developing a debt-plagued world economic situation as well and then they are the only ones who can come to the rescue and “save” it.
A debt-burdened world can never be saved by even more financial debt. Next, we will certainly see limitless cash printing that squashes money as well as leads to depressionary run-away inflation.
Inflation is on the Way
The reckless money printing by the Fed is expected to bring about an inflation crisis. Analysts are convinced that unprecedented money printing could increase inflation substantially. That means your cash will lose value. For example, if you are planning to take a holiday to an exotic location with your retirement savings, chances are that you will not be able to afford it. You could probably end up at a cheap resort nearby.
Business Collapse and Unemployment.
Market bulls argue the market is already recovering. Shops are opening, factories are back in business, restaurants are opening too, stocks are holding up, and so on.
They are wrong. Unfortunately, unemployment levels are massive and still growing. Several airlines already declared bankruptcy. Some of them are Avianca from Colombia, Virgin Australia, Trans States Airlines from the US, Compass Airlines also from the US, and many others. Rolls Royce announced 9000 job losses in the UK, Nissan shut down its Barcelona plant in Spain with 3000 redundancies, and another 25000 jobs indirectly threatened.
In the US the news is not good either. The country has lost 20,6 million jobs since mid-March, resulting in an unemployment rate of 14,7% a level not seen since the great depression in the 1930s. I am afraid, there will be more business collapse and more unemployed in the following months.
The recession is going to be bigger than the 2008 recession. It will take years for the world economy to recover not months or weeks. The numbers are already massive and still growing. As I just said, the economy is not going to be back to where it was within a year that’s for sure. So why is the stock market still high? What is that’s still driving equity prices? It is the Fed’s liquidity.
Stocks and Bonds Set to Collapse
In genuine terms, all bubble possessions will now collapse. Actual terms indicate secure acquiring power and evaluate against gold. We will see supplies, bonds, and residential or commercial property decline by 90-100% against gold. In nominal terms, stocks may go up at first with hyperinflation. That will just be imaginary gains.
Supplies worldwide dropped initially by around 40% and have currently recouped half of that loss as stock capitalists have been buying the dips in the hope that central banks will certainly save them afterward. Yet they will certainly quickly have their next shock. Markets might begin their next leg down already in the coming week. Or it could take 2-3 weeks. What is clear is that a profane bearish market has begun which has a very long way to go.
Gold is Still Undervalued
For twenty years I have discussed the value of riches conservation in the form of physical gold. Throughout that time gold is up 6-7 times depending on which currency you rate it with. Still, much less than 0.5% of world economic possessions are in gold.
Gold is still exceptionally undervalued regarding the growth of the international cash supply. It is still possible to obtain gold, yet the physical market is under real pressure.
This is an outrageous circumstance that will not last long. Both the Comex and the LBMA are under huge pressure which quickly will lead to substantial distribution problems and also a significant cost squeeze. The home window of opportunity to acquire physical gold at current costs will soon close.
Keep in mind that gold is actual physical wealth in addition to an insurance policy against a monetary system that is unlikely to make it through. Gold can still be bought with miscalculated fiat cash at prices significantly below its genuine value, however, not for too long.
Over the last few days, we’ve all witnessed gold breaking over the $1600 mark as stocks suffer significant losses. There is a lot of nervousness in the market which is one of the reasons why gold breaks over the 1600 mark, and people are putting gold and silver into their portfolios.
Why Gold Breaks Over the 1600 Mark
In the meantime, the US dollar is actually strengthening against both the Euro and the Japanese Yen. Investors see the dollar as a safe haven trade, as people move into the dollar and into the US equity market. In this market condition, there is a headwind for precious metals, especially gold.
The Coronavirus Threatens the Global Economy
The coronavirus has caused an unprecedented economic slowdown with investors rushing into gold to safeguard their investments. The market did not take seriously the effects of the coronavirus early and only recently came to terms with the massive threat it poses to the global economy.
A few days ago the Chinese finally admitted that their GDP is going to get hammered in the first quarter. The market now is taking this seriously. If this continues for very much longer it will have a devastating impact on global growth which will put all the central banks including the FED on full monetary easing policy and that reality is starting potentially to sink in.
More Reasons for the Gold Rally
In addition, the coronavirus is just the tip of the iceberg. There are many reasons for the price of gold to hit the roof apart from the Wuhan virus.
The overvalued stock market will have to correct itself sooner or later
The upcoming recession that is been held up by the FED
The war on cash with the Europeans continuing their negative interest rates policy
The metals, gold, and silver, continue to charge higher with parabolic moves and heavy volume. In my opinion, it will be healthy for gold to see a pullback, to allow some profit-taking if this is going to be a bull market. All the signs are there for the rally to continue, we are bullish on gold and silver.
As gold consolidates around the $ 1,500 mark, investors are turning to silver and all investors are wondering when will silver’s price rise? Silver already enjoys a year’s high, but compared to gold, still has a long way to go. If we take into account that gold enjoys a six-year high, to silver’s one year, then yes silver has a lot going for it.
When Will Silver’s Price Rise?
The truth of the matter is that silver has been consolidating for a number of years together with gold. Gold broke through this year and made some of the lost ground. On the other hand, silver’s breaking was not anywhere near gold’s. As a result, the gold-to-silver ratio is 88 at this moment.
Gold, silver’s rival, is consolidating at around the $ 1,500 mark right now, but it still has the potential to move higher. As long as the large economies around the world fall into recession, the trade war between the United States and China, the possibility of a no-deal Brexit, the troublesome Italian Banks, the civil unrest in Hong Kong, the German Economy’s slowing down, the United States economy slowing down, Turkey is just about to turn its back to the west and join Russia. You will have to be mad not to own gold and silver.
Right now the US and the German economies are still vibrant but all economic data suggests both economies are slowing down. The recession will hit both countries in 2020. That’s my humble opinion.
Recession Is Coming
If all hell breaks loose (no-deal Brexit, Italian Banks collapse, US-China trade war deteriorates, etc.) then there is no doubt, the recession will be as bad as the 2008 recession.
If you are going to engage in the precious metal market, then silver is the way to go. The gold to silver ratio has dropped from 93 to 88 so the momentum is there. In my opinion silver at $17,10 per ounce is dirt cheap.
According to Peter Hug, Kitco’s global trading director, the demand for silver in Hong Kong is much stronger than the demand for gold. The Chinese are adamant, that silver is currently undervalued.
If gold reaches $1600 by the end of the year, then silver should be between $18,50 to $19,00. Nevertheless, the silver-to-gold ratio will drop, one way or another. I think the when will silver’s price rise question has been answered.