I have tried to explain this concept many times before but never had a chart to do it with. Please note the start date of the chart is 1971, this is not by any coincidence as that was the year the U.S. dollar became fully fiat and backed by nothing but “faith”. Before getting started, it is important to understand what August 15, 1971 really meant and why Nixon took us off the gold standard. The obvious is because with France and other nations demanding conversion of dollars into our gold, it would have only been a few short years before our stockpile was completely depleted.
The other, less obvious (so far) reason to come off the gold standard was because it allowed the U.S. to operate without the “restrictions” on monetary (and fiscal) policy that a gold standard imposes. In other words, once gold’s restrictions were lifted, literally unlimited amounts of dollars could be printed by the Fed along with unlimited amounts of fiscal borrowings by the Treasury…to a point. The chart above actually shows you exactly where that point in time was, please let me explain “why”.
My latest interview with Greg Hunter. Please watch, post or forward if you wish.
Financial writer and gold expert Bill Holter says China has a lot of weapons to fight a trade war with the U.S. China could stop buying Treasury bonds (as it reportedly already has done). It could sell Treasury bonds. It could slash the value of the Yuan, or something much simpler could happen such as a failed delivery of physical precious metals. Holter says, “If what has happened so far in the first three months of the year were to continue for the full year, you would be over three billion ounces (of silver). That is not deliverable.”What happen when the world figures out that three billion ounces of physical silver cannot and will not be delivered to the buyers? Holter explains, “That’s called an old fashion run on the banks. It will be a run on the entire system. You would have a run on every metals exchange, and you would probably have runs on many physical commodities. Confidence throughout the whole system would break. You would basically show the western fractional reserve system is a fraud and has been for many, many years. . . . Can London deliver a billion ounces, or two billion ounces or three billion ounces of silver? The answer to that is no.”
We are hearing daily about the possibility of “trade wars”. It is this possibility that is being blamed for the increased volatility (read markets dropping), but I do not believe it is the only factor. In fact, equity markets began their upset as interest rates marched higher and prior to any talk of trade wars. Of course other factors exist such as cross currency rates (which directly affect trade) and liquidity, not to mention the gross indebtedness of nations.
Looking at “finance and economics” from a broad view, we can see they are part and parcel of and actually used as tools for outright war. There are many examples of history such as the US civil war where the North embargoed the South, Germany being starved for oil in WWII, and more recently the USSR being forced to overspend militarily and having the ruble undermined leading to their ultimate bankruptcy.
I am back from travelling and my inboxes have swelled to nearly 2,000 e-mails. I try to reply to e-mails as long as they are courteous and logical but I cannot dig out from under this backlog. Please know that your e-mail will be read today but if you sent anything to me earlier this week, do not expect a reply as it is a larger undertaking than I am up to.
“Unprecedented”? Haven’t we told you about this for more than a year?
In Unprecedented Move, China Plans To Pay For Oil Imports With Yuan Instead Of Dollars March 31, 2018
Just days after Beijing officially launched Yuan-denominated crude oil futures (with a bang, as shown in the chart below, surpassing Brent trading volume) which are expected to quickly become the third global price benchmark along Brent and WTI, China took the next major step in the challenging the Dollar’s supremacy as global reserve currency (and internationalizing the Yuan) when on Thursday Reuters reported that China took the first steps to paying for crude oil imports in its own currency instead of the US Dollars.
A pilot program for yuan payment could be launched as soon as the second half of the year and regulators have already asked some financial institutions to “prepare for pricing crude imports in the yuan”, Reuters sourcesreveal.