by Doug Casey, Gold Seek:
International Man: Gold has seen a dramatic rise recently. What do you think is driving this surge—inflation, geopolitical instability, loss of faith in fiat currency like the US dollar?
Doug Casey: The answer is all of the above.
First, inflation is not retail price rises, as most people think. The rise in prices is a consequence of inflation, not inflation itself. Inflation is the creation of excess purchasing media above the creation of real wealth. Inflation is caused by two things: the Federal Reserve buying assets and increasing its balance sheet, financing government debt by creating currency and credit. And the banking system creating money via commercial loans, facilitated by fractional reserve banking.
TRUTH LIVES on at https://sgtreport.tv/
Short answer: inflation has been a primary cause for gold’s moving up not just over the last few years, but over the last 50 years.
Geopolitical instability? Absolutely. All the world’s currencies, including the US dollar, are fiat instruments. If a government falls, historically, its currency goes with it. People are increasingly looking for a place to put their wealth and savings other than a fiat currency.
And this leads to the last thing you mentioned—a loss of faith in fiat currency itself. The cat is out of the bag at this point, and all over the world, there’s a loss of faith not just in currencies, but governments themselves.
What can you do? You can buy real estate, of course, or you can invest in a productive business—but gold, and more recently Bitcoin, have been the big beneficiaries of this loss of faith.
International Man: Do you believe the dollar’s global reserve status is at risk? If so, what could replace it—a gold-backed system, or something else entirely?
Doug Casey: There’s no question that the dollar’s reserve status is at risk.
Governments recognize each other’s fiat currencies for what they are: the unbacked liabilities of bankrupt entities. And most world governments are, in point of fact, bankrupt.
That’s most dangerously the case of the US dollar, the world’s long-time numeraire. Why should the Chinese, or any other government, hold the currency of its adversary? The currency might be blocked, as it was for the Russians. It will certainly be inflated. Or might suffer an outright default. Governments don’t trust each other, and they certainly don’t want to use the unbacked liability of an often antagonistic or even hostile government.
The major export of the US since about 1980 has not been computers, or Boeing, or soybeans. It’s been dollars. Every year, the trade deficit—the export of dollars—runs in the hundreds of billions. More recently, close to a trillion dollars per year. Those dollars outside of the US amount to liabilities of the US.
If foreigners want to dump those dollars, they’re going to come back home to the US to buy real goods—shares of businesses, buildings, farmlands, what have you. When that happens, the amount of real wealth owned by Americans will plummet, and the amount of fiat dollars inside the country will explode.
A digital currency will aggravate the situation. At that point, money becomes just a computer digit controlled by the central authorities. If you think the situation is unstable now, it’s going to become much more unstable as the world’s governments go to centrally controlled digital currencies.
International Man: You’ve often said, “The dollar is an IOU nothing.” Has that moment of reckoning finally arrived?
Doug Casey: Just because something is inevitable doesn’t mean that it’s necessarily imminent. But at this point, the government has really gone on tilt. It’s completely out of control. I believe we’re now at the edge of the precipice.
DOGE was just a bit of electioneering and marketing on the part of Trump. The interest on the $38 trillion acknowledged US debt will keep rising along with the debt itself. Regardless of what may happen with interest rates over the next year or two, in the long run, they’re headed much, much higher.
Military spending isn’t being cut. As we get deeper into World War III, it will go much higher. Welfare payments are the same. As the standard of living goes down, people will demand more from the government.
The situation is completely out of control. The US has become quite unstable. I was talking about a civil war ten years ago; now they’re making movies about the prospect.
