GOLD 0.51% $1,391.7 gold futures

gold fiat money and monetization of debt

  1. 601 Posts.

    All national currencies in circulation, issued and managed by the respective central banks, are fiat currencies. As most of the worlds paper money is fiat money, which is based solely on faith, If people lose faith in a nations paper currency the money will start to lose its value. We are at a critical moment in history. Never before has money been debased on such a grand scale. Never before has so much debt been owed and never before have monetary authorities been so helpless to control the destructive forces they themselves set in motion. The on going deleveraging or sale of assets at lower and lower prices to reduce debt is now resulting in massive losses for many companies, individuals who now face liabilities in the form of remaining debt with no equity left. The USA has leveraged itself so badly . The most recent US flow of funds data, straight from the Fed itself, shows that total US credit market debt is $US 51 TRILLION versus a $US 14.3 TRILLION US GDP. US debt as a percentage of US GDP is now 356 percent versus 260 percent during the great 1930s Depression. This bluntly shows that even toget the US debt/GDP leverage ratio back to the peak it was at during the Great Depression would require another $US 14-15 TRILLION in present US debts being cleared off the field. To take the US debt/GDP leverage back into saner historical territory would take yet another $US 14-15 TRILLION on top of that.
    The economy is shrinking so tax revenues are falling thus making it even harder to pay back this debt. So how long will it take to pay back this debt out of taxes? The question now seriously arises as to whether the USA will monetize some of the debt. That is To convert (government debt) from securities into currency that can be used to purchase goods and services. In other words, by means of “monetization” of government debt, government can discharge (not pay) its debt on credit without having to overtly raise taxes (and annoy those bothersome taxpayers).

    The case for Gold does not seem to go away under the current scenario
 
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