SGM Metals: "Addiction to Fiat Money has Enslaved Us to the Whims of Central Banks"

As easy money created through cheap credit leveraged by the banks has spoiled the western world it is now time for a rebalancing of monetary physics. The new normal will be more restrictive & the ability to adjust unfortunately will escape most of us
 
 
What happens when the easy money & free govt. goodies trains run out of track?
What happens when the easy money & free govt. goodies trains run out of track?
 
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Currency War Glass-steagall Derivative
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Oct. 11, 2012 - PRLog -- Dailycaller.com reports: [ Over the past 40 years, the FED has been force-feeding the world the idea that its printing press puts out more valuable paper than anyone else’s. This is, of course, because in 1971 it was given legislative approval to manage the U.S. currency, without any asset restrictions.

At the time the world was already addicted to U.S. dollars as a reserve currency due to the dollar’s tie to gold. As long as the dollar remained pegged to gold (at least in theory), other countries’ currencies maintained the same tie in proportion to their dollar reserves.

At first the nations balked when Nixon cut the golden thread, ending the world’s last true money base & creating the greenback. They knew that he had just undercut their value, & the dollar fell hard at first. However, they soon realized that a falling dollar was bad for their own currency, so they adopted a more accepting posture. Since then the management of the world’s reserve currency has rested in the hands of the Fed.

Over the years the American people have grown accustomed to the fiat currency. Realizing that inflation would destroy savings over a long period of time, spending became much more acceptable. After all, why save a thousand dollars only to see its purchasing power diminish over the years? Better to buy what you want & enjoy it now. So, as the time passed, Americans became net spenders rather than net savers.

There was a time when banks & Wall Street weren’t allowed to share the same bed; at least not officially. Banks needed to concentrate on serving customers & keep their interests from being clouded by markets. Everyone understood that once banks started getting involved in the markets, caring for customers’ cash would become secondary to shooting for massive profits.

When Glass-Steagall was repealed in 1999, it was already all but dead. Legislators had neglected to uphold the act, allowing banks to grow in their securities’ interest. As the money supply became less restricted & the banks less regulated, the inevitable occurred. The banks became addicted to easy money. And, of course, they passed this easy money off to the people. Everyone was enjoying easy money, while very few were considering the consequences.

Welcome to Western civilization in the 21st century. From the top down, we’ve become addicted to easy money. The problem is, there’s a price to pay. Our addiction has enslaved us to the whims & mechanisms of the central bankers.

Consider the recent announcement. As the drug addicts (bankers/Wall Street) lined up waiting to hear what would happen, their mouths watered for more QE. Never mind that past QE only offered a temporary fix. Never mind that inflation is destroying the backbone of our economy, the working man. They just wanted their fix. And, of course, they got it. In fact, they were promised that it wouldn’t end until their bellies were full.

How long did it take before their bellies groaned again? By the end of the first week we’re seeing cries for more QE. QE∞ simply wasn’t enough. The addict is crying for another fix. To whatever degree the pusher complies, the addiction will deepen & the health of the addict will deteriorate. The only answer lies in breaking free of the addiction.

In the immediate term, the best way to do so is likely to accumulate assets that do not diminish in value. Precious metals, some properties & other assets can stand the test of time. In the long run, for our posterity, the only solution is to be freed of the Fed shackles we’ve embraced. However, as voters have shown in a strange & sad irony, America is not ready for freedom.]

The fact that the closing of the gold window disengaged the last vestiges of a sound asset backing & limiting the amount of money that could be printed truly is the turning point for the dollar’s eventual demise. From that fateful day in 1971 moving forward the money that we all slave away to acquire on a daily basis became simply a paper labor voucher & nothing more. At first the other nations rebuffed this re-invention of the global monetary system seemingly overnight as it would hurt their economies as well. But once the world began to reject the newly re-invented “print as much as we want because we can” version of the USD it began to plummet immediately. The consequences of this new paradigm the FED invented overnight became very clear, very quickly, “if we go down you will go down with us too so you better not only play along, but play your role and keep the bubble inflated or else”! The other nations quickly realized they had made a deal with the devil & they were forced to go along for the ride no matter how much they wanted to get off. Much like the US tax payers except the average person doesn’t know why they can’t hardly keep their heads above the waterline but realizes they hardly have enough time to stop & ponder this issue as they have to get to their second job so they can feed their children.

{Realizing that inflation would destroy savings over a long period of time, spending became much more acceptable. So, as the time passed, Americans became net spenders rather than net savers. } This is the elephant in the room that most people can’t identify, much less talk about as an issue that threatens their financial well being. Once people realized they would lose the value of their money if they simple attempted to save those hard earned dollars by putting them under the mattress it became clear they would do better to put them to use before they shed too much value. It became clear that you would do better economically if you invested those dollars in a home that would inherently rise in value as the years went on. By neutralizing this erosion of value in the currency the inherent dollar devaluation began to slowing create a reverse engineered crisis by inflating the asset bubble of homes as they demanded ever higher prices as the real estate boom brought more demand & people were all too willing to spend those dollars. And so the bubble began to inflate as people were trying to avoid the fiat money bubble.

Fiat money has no value, only the perception of value & it only has the perception of value if the people of the land believe it is worth something. Citizens realized they would lose 1/3 of their hard earned net worth to the devaluing dollar & decided to head this affect off by spending those dollars before it began. US consumers were conditioned to be perpetual shoppers (which was a necessity in the beginning to stave off the dollar devaluation) & the logical extension of credit came into the banks wheel house to fill the gap where the disposable income had long been thinned out. So now you see the interdependent nightmare we have on our hands. The banks need to you to constantly spend money (you don’t have), or use the credit cards (the banks have reigned credit lines in across the nation) to consume crap that we import from China on borrowed dollars to keep the image of the US economy moving forward for fear the world will figure out we are done & start a global dollar panic.

This is not going to be fixed by the next president. We have decades of painful reshuffling that must take place in order to find the true economic equilibrium so that we can establish a solid footing to rebuild the economy. “They” will do anything they can to avoid this reality coming true & this will create even more economic peril for the average Joe to navigate. Establish your “Weak Dollar Insurance Policy” in physical gold & silver bullion today & begin to participate in the sound money debate. Inflation can morph into hyperinflation, recessions can morph into depressions & currency wars often morph into trade wars that can then degrade into real wars. Remember that it is a far better strategy to PREPARE your portfolio rather than to attempt to REPAIR it once the fear fueled damage has begun. These are dangerous times for us all, but remember that knowledge is power. Tick, tock.
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Source:SGM Metals & The Elemental Economist
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Tags:Currency War Glass-steagall Derivative, Gold Silver
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