by Egon Von Greyerz, Gold Switzerland:
The world is now witnessing the end of a currency and financial system which the Chinese already forecast in 1971 after Nixon closed the gold window.
Again, remember von Mises words: “There is no means of avoiding the final collapse of a boom brought about by credit expansion.”
History tells us that we have now reached the point of no return.
So denying history at this point will not just be very costly but will lead to a total destruction of investors’ wealth.
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POLITICIANS LIE WITHOUT FAIL
History never lies but politicians do without fail. In a fake system based on false values, lying is considered to be an essential part of political survival.
Let’s just look at Nixons ignorant and irresponsible statements of August 15, 1971 when he took away the gold backing of the dollar and thus all currencies.
Later on we will show how clearsighted the Chinese leaders were about the destiny of the US and its economy.
So there we have tricky Dick’s lies.
- The suspension of the convertibility of the dollar in 1971 is still in effect 52 years later.
- As the dollar has declined by almost 99% since 1971, the “strength of the economy” is also declining fast although using fiat money as the measure hides the truth.
- And now to the last lie: “Your dollar will be worth as much tomorrow”. Yes, you are almost right Dick! It is still worth today a whole 1% of the value when you closed the gold window.
The political system is clearly a farce. You have to lie to be elected and you have to lie to stay in power. That is what the gullible voters expect. The sad result is that they will always be cheated.
CHINA FORECAST THE CONSEQUENCES ALREADY IN 1971
So in 1971 after Nixon closed the gold window, China in its official news media the People’s Daily made the statements below:
Clearly the Chinese understood the consequences of the disastrous US decision which would destroy the Western currency system as they said:
- Seriousness of the US economic crisis and decay and decline of the capitalist system
- Mark the collapse of the monetary system with the US dollar as its prop
- Nixon’s policy cannot extricate the US from financial and economic crisis
I am quite certain that the US administration at the time ridiculed China’s official statement. As most Western governments, they showed their arrogance and complete ignorance of history.
How right the Chinese were.
But the road to perdition is not immediate and we have seen over 50 years the clear “decline of the capitalist system”. The end of the current system is unlikely to be far away.
Interestingly it seems that a Communist non-democratic system is much more clairvoyant than a so called Western democracy. There is clearly an advantage not always having to buy votes.
IRRELEVANT WHICH CURRENCY WINS THE RACE TO THE BOTTOM
As the whole currency system is about to implode, it is in my view totally irrelevant where the US dollar is heading short term measured against other fiat currencies.
The dilemma is that most “experts” use the Dollar Index (DXY) as the measure of the dollar’s strength or weakness. This is like climbing the ladder of success only to find out that the ladder is leaning against the wrong building.
To measure the dollar against its partners in crime (the other fiat currencies) misses the point as they are all on the way to perdition.
So the dollar index measures the dollar against six fiat currencies: Euro, Pound, Yen, Canadian Dollar, Swedish Kroner and Swiss Franc. The Chinese Yuan shines in its absence even though China is the second biggest economy in the world.
But here is the crux. The dollar is in a race to the bottom with 6 other currencies.
Since Nixon closed the gold window in 1971 all 7 currencies, including the US dollar, have declined 97-99% in real terms.
Real terms means constant purchasing power.
And the only money which has maintained constant purchasing power for over 5,000 years is of course gold.
So let’s make it clear – the only money which has survived in history is GOLD!
All other currencies have without fail gone to ZERO and that without exception.
Voltaire said it already in 1729:
PAPER MONEY EVENTUALLY RETURNS TO ITS INTRINSIC VALUE – ZERO
And that has been the destiny of every currency throughout history.
Every single currency has without fail gone to ZERO. And this is where the dollar and its lackeys are heading.
To debate if a currency, which has fallen 98.2% in the last 52 years, is going to strengthen or weaken in the next year or two is really missing the point.
It is virtually 100% certain that the dollar and all fiat money will complete the cycle (which started in 1913 with the creation of the Fed) and fall the remaining 1-3% to ZERO.
But we must remember that the final fall involves a 100% loss of value from today.
BRENT JOHNSON & MATT PIEPENBURG DEBATE THE DOLLAR
So to debate whether the dollar index which today is 103, will reach 150 first as my good friend Brent Johnson argues in his Dollar Milk Shake Theory or that it will fall from here as my colleague Matt Piepenburg contends, really misses the point.
There is no prize for coming first to the bottom. The dollar is down almost 99% in real terms since 1971. So it has a bit over 1% to fall to reach ZERO.
And history tells us that the final fall is INEVITABLE.
So why worry if the Dollar or the Euro becomes worthless first? It really is a mute point.
Brent Johnson and Matt Piepenburg recently had a debate on Adam Taggart’s new platform “Thoughtful Money”. Adam is an outstanding host with great speakers and both Brent and Matt were superb in their presentation of the arguments for or against the dollar. But even though they both like and understand gold, they got a bit too caught up in the dollar up or down debate rather than focusing on the only money which has survived in history. Still, I know that they both appreciate that gold is the ultimate money.