Fiat Currency Race To Zero: The “Suddenly” Part Of The Story Approaches

“Gold, unlike all other commodities, is a currency…and the major thrust in the demand for gold is not for jewelry. It’s not for anything other than an escape from what is perceived to be a fiat money system, paper money, that seems to be deteriorating.” … Alan Greenspan, ex-US Federal Reserve Chairman, August 23, 2011

The chart on the right shows the purchasing power of the dollar from when the Fed was founded to present. Pretty much self-explanatory but it’s why we buy and own physical gold. For now the price of gold has found resistance – likely official – in the high $1700’s.  But that will soon change as gold soars in response to what appears to be global Central Banks’ – led by the Federal Reserve – willingness to print unlimited quantities of paper currency in order to keep price (note: not “value”) of  financial assets elevated.

The overwhelming imperative to keep control of markets is a recipe for hyperinflation and will ultimately fail. The Fed would have us believe that the slump in business activity is only due to the coronavirus lockdown and that shortly after it ends normality will return. It will hope that we have forgotten that fully five months before the virus hit, it was forced to inject liquidity into the repo market at the rate of tens of billions every day.

The Fed’s monetary policy replicates John Law’s attempt to keep his bubble going in 1720 France. Law failed to maintain the price of just one asset, the Company of the Indies, his Mississippi venture, by printing livres to buy the shares. Within seven months the currency had collapsed and priced in worthless currency, the shares had fallen from 12,000 livres to just one or two thousand.

The principal upon which the Fed and the other major central banks are embarked is the same in every respect, but with a far larger task. The project will fail for the same reason: no one can fool all of the people all of the time. It is increasingly obvious that both the currency and financial asset values will collapse John Law-style, probably by the end of this calendar year, if precedents are any guide.

The passage above is from Aladair Macleod’s latest essay which explains in detail the process why fiat currencies will eventually become offered without a bid while, concomitantly, physical gold goes bid without offers:  Anatomy Of A Fiat Currency Collapse

4 thoughts on “Fiat Currency Race To Zero: The “Suddenly” Part Of The Story Approaches

  1. Dave
    3 plus years ago you had multiple posts, over time, from a person’s writings ( Charles maybe?) about the coming depression. I cannot recall his name but I do remember his opinion on the future outcome was very dire. It now appears to be timely. Any chance you can repost or direct me to his work? Thank you for your hard work.

  2. Collapse by the end of the year? That is very optimistic. I figured
    that at the rate dollars are being flooded into the global system,
    August/September was when we would begin to see inflation that
    would begin to freak out the general public. Gentlemen start your
    wheelbarrows.

  3. The cause of the hyperinflation in Germany in 1923 was indeed the unlimited printing of currency. However, today very little currency is in circulation as most of the money is form of digital bank account balances. These balances were created as loans, which need to be paid back. So that is a very different from the German and the Zimbabwe hyperinflation. The falling price of oil is an indication of dramatically falling demand which does not support the thesis of hyperinflation. Hyperdeflation can not be excluded as a possibility. If that hypothesis is indeed true, then this would explain why the creation of all the central bank money does not affect prices. I am presently in Africa. The purchasing power of the Dollar is amazing. Everybody wants Dollars. Does not support the thesis of Hyperinflation.

    1. They are following the logic of “Any exit point is better than no exit point”, and they need to get out of whatever it is that they’re in, and the USD is that exit point. Even a tiny little bit of light peeking through the rubble of a cave in, is worth trying to use as your exit point, despite how many tons of huge boulders are involved.
      There is no nation on Earth today, that does not use a fiat paper currency/electronic bookkeeping entry financial system. ALL of them use the exact same lie of the viability of an unlimited expansion of the “money “supply, to sell their garbage to us. One guy I know, apparently does not believe that any nation has ever suffered a fiat paper currency collapse before, because he said that they can just keep on printing it “to infinity and beyond”!! He will think differently when trillions of tons of fiat paper currency won’t buy him a loaf of bread, and he has no electricity or water or gasoline because nobody could pay the light bill.
      One can ignore reality, but no one can ignore the consequences of ignoring reality.

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