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Author Archives: V C

What is a “global currency reset”? Let’s parse the term by first explaining that a currency reset is either a revaluation or devaluation of a nation’s currency within a fixed exchange rate system. If a nation revalues its currency, its central bank raises the value of the nation’s currency at a fixed peg with a reserve currency, such as the U.S. dollar. A devaluation would lower the value of the currency in relation to the reserve currency. The alternative — which most of the world’s developed economies use — is the free-floating currency, which means the currency’s value is independent of the values of other currencies. Hence, the value of a free-floating currency is determined by supply and demand.

Generally, a nation revalues its fixed exchange rate currency in response to positive economic growth and trade surpluses, as China did with the renminbi in 2005. If a nation runs trade deficits or suffers continuous capital outflows, they may find themselves obliged to devalue their currency. One way nations devalue free floating currencies is, intentionally or not, by inflation. Many economists assert that a fixed exchange rate muzzles inflation. However, the U.S. Federal Reserve has spent trillions buying securities through its Quantitative Easing program; officially, the federal government claims that the nation’s inflation rate has been around 2% annually. With all the new money introduced by the Fed over the past few years, the market dynamics of supply and demand dictate that high inflation or even hyperinflation is on the horizon for the U.S. dollar.

Thus, a “global currency reset” (GCR) would be either a revaluation or devaluation of a reserve currency. It could even mean that the world moves away from the reserve currency altogether. The most apocalyptic scenario would involve a hundred countries or more simultaneously devaluing their currency – an event unprecedented in world history but one not beyond the realm of possibility. Why would this cataclysm occur? It would be a currency world war where scores of nations compete to lower their exchange rate to boost their exports and remedy trade deficits. And according to some economists, currency wars don’t contribute to economic depressions — they end them.

As the U.S. dollar has been the world’s reserve currency since World War II, a GCR would have a profound impact on the dollar’s role in international finance and trade. Perhaps most significantly, the U.S., which has borrowed exorbitantly since the time of the Vietnam War, would see its borrowing costs skyrocket. European economists have conceptualized the term “exorbitant privilege” for the advantage that the U.S. holds over other nations by benefit of being the world’s reserve currency. By serving as the world’s reserve currency, the U.S. would never face a currency crisis (i.e., a sudden currency devaluation). A GCR would remove America’s exorbitant privilege. BRIC nations are already in the process of moving away from the dollar. For example, China has established bilateral trade agreements with with Australia, Japan, Thailand, Russia and Vietnam that allows for direct currency trade instead of converting to the U.S. dollar.

What does this have to do with precious metals? A GCR, which is already beginning, will devalue the U.S. dollar, causing inflation to rise rapidly. If Americans (or anyone else) have their wealth stored in the dollar, a fiat currency, inflation will rob them of their affluence. What will serve as a reserve currency? Gold and other precious metals have traditionally been a steadfast haven for protecting wealth. When fiat currencies collapse beneath their worthless weight, intrinsic assets like gold and silver will remain as a benchmark for the world’s currencies. Just look at the amount of gold China, India and the other BRICs have purchased since the Great Recession and draw your own conclusions.

Precious metal sages are fond of saying: “Don’t wait to buy gold and silver. Buy gold and silver and wait.” That’s what the world’s richest individuals do.

On Friday 18 October at 8:42 am (UTC-05), a colossal amount of gold futures sell orders inundated the Chicago Mercantile Exchange (CME), plunging gold prices by $25 in two minutes. Five thousand contracts “at the market” (available market price) were suddenly sold, paralyzing the market as trading was halted for 10 seconds. Reports indicate thatContinue Reading

Most of us have been there at some point. We’ve contemplated taking a portion of money from our IRA or 401k. Whether it’s to help pay the bills during tough times, or to help fund a much needed vacation, it can be tempting because an actual retirement date is so far away. Surely there’s plentyContinue Reading

Retirement is that one day in the future we all look forward to, when we’re work free, carefree and living life to its fullest. Retirement at age 65 is no longer the goal or even an option for most Americans. While it was once a target age, more Americans are needing to work past ageContinue Reading

Salaries are not easily moving upward these days, and in many cases people are making much less. It’s fairly tough to set aside a chunk of your check for retirement when your monthly income barely covers necessary expenses. There are a few things you can do to prepare and plan for retirement even if youContinue Reading

A Roth IRA (Individual Retirement Account) is a type of retirement account that offers tax-free income in retirement. A Roth IRA is unlike a Traditional IRA, in that there is not an up-front tax deduction. Roth IRA’s are ideal savings vehicles that can be held in addition to a Traditional IRA, especially if you expectContinue Reading

As of this afternoon, 3 July 2013, the spot market for gold is US$1,249. This price is almost 50% lower than its all-time high two years ago but on the other hand it is almost 50% higher than its price nearly five years ago in October 2008.  As recently as last December gold stood atContinue Reading

What is Inflation and Hyper-Inflation? Ron Paul states that inflation is a simple concept to grasp: more money equals less value. Per Investopedia, hyperinflation is “rapid or out of control inflation” and is often due to a substantial increase in a nation’s money supply not supported by corresponding growth in gross domestic product (GDP). NoteContinue Reading

Considering the action in the gold price this past week, along with all the sudden negative sentiment from entities like Goldman $achs, Soc Gen (especially funny as they said in June 2012 that gold could go as high as $8500), etc, one has to consider whether there was something more sinister behind it all.  Now, don’tContinue Reading