{"id":17021,"date":"2024-01-18T21:17:59","date_gmt":"2024-01-18T19:17:59","guid":{"rendered":"https:\/\/www.liberalglobe.com\/?p=17021"},"modified":"2024-01-18T21:17:59","modified_gmt":"2024-01-18T19:17:59","slug":"the-chances-of-the-global-financial-system-collapsing","status":"publish","type":"post","link":"https:\/\/www.liberalglobe.com\/?p=17021","title":{"rendered":"The chances of the Global Financial System collapsing"},"content":{"rendered":"\n<p>&#8220;There is no way to avoid the collapse of a system that has expanded more than it was allowed to because of manorial credit expansion&#8221; <em>Ludwig von Mises<\/em>.<\/p>\n\n\n\n<p>History shows us that we have reached our limits. History never lies, but politicians do. In a system that has expanded more than it was allowed to because of an alarming over-extension of credit without substantial countermeasures, which financial system is based on false values, lying is considered an essential part of political survival.<\/p>\n\n\n\n<p>Let&#8217;s just look at the statements of the 37th President of the USA Richard Milhous Nixon on August 15, 1971, when he delinked gold from the dollar and therefore from all currencies. As a result, we had two difficult &#8220;lies&#8221; to tell:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The suspension of the convertibility of the dollar in 1971 which is still in effect 52 years later.<\/li>\n\n\n\n<li>Since the dollar has fallen 99% since 1971, the &#8220;power of the economy&#8221; is also rapidly declining, although using fiat currencies as an indicator hides the truth.<\/li>\n\n\n\n<li>Your dollar will continue to have value.<\/li>\n<\/ul>\n\n\n\n<p>The political system is clearly a joke. You have to lie to get elected and you have to lie to stay in power. This is what naive voters expect. The sad thing is that they will always be deceived.<\/p>\n\n\n\n<p>So in 1971, after Nixon closed the gold window, China in its official media made the following findings. Clearly the Chinese (communists) understood the consequences of the disastrous US decision that would destroy the Western monetary system. As they pointed out, the seriousness of the US economic crisis and the decline of the capitalist system are coming very soon.<\/p>\n\n\n\n<p><strong>The Break-even point<\/strong><\/p>\n\n\n\n<p>Since the entire monetary system as we know it could explode, we should be interested in what the dollar will do. Most &#8220;experts&#8221; use the dollar index (DXY) as a measure of dollar strength or weakness.<\/p>\n\n\n\n<p>The index of the dollar against its partners in crime (the other fiat currencies) indicates one thing: everything is on the road to impending doom. So the dollar index measures the dollar against six fiat currencies (euro, pound, yen, Canadian dollar, Swedish krona and Swiss franc), the Chinese yuan shines in its absence.<\/p>\n\n\n\n<p>Note that since Nixon closed the gold window in 1971, all 7 currencies, including the US dollar, have fallen 97-99% in real terms &#8211; real terms meaning constant purchasing power. The only money that has maintained consistent purchasing power for over 5,000 years is of course gold.<\/p>\n\n\n\n<p>Voltaire said it in 1729: \u201cThe value of every paper currency is destined to be reduced to zero\u201d \u2013 and this is where the dollar gets stuck. The dollar has fallen 98.2% over the past 52 years, in real terms. However, the final drop implies a 100% loss in value.<\/p>\n\n\n\n<p><strong>The US dollar<\/strong><\/p>\n\n\n\n<p>Therefore, discussing whether the dollar index, currently at 103, will reach 150, or retreat from current levels, seems a bit redundant.<\/p>\n\n\n\n<p>The dollar has lost almost 99% in real terms since 1971. So it has just over 1% to fall to reach 100% of its value loss. And history tells us that the final fall is inevitable.<\/p>\n\n\n\n<p>But to time whether the dollar will decline or strengthen we should focus on the only money that has survived in history: gold, which is the ultimate money. The world&#8217;s reserve currency (dollar) has performed dismally due to poor real growth in the US economy, which is due to the mismanagement that takes place within an economy based on debt and paper money (please read the analysis entitled &#8220;<a href=\"https:\/\/liberalglobe.com\/?p=17018\">The US Debt exceeded $34 trillion &#8211; The options to correct the situation<\/a>&#8220;).<\/p>\n\n\n\n<p>Note that although most currencies have lost 97-99% in real terms since 1971, there are glaring exceptions. In 1971, one dollar cost 4.30 Swiss francs. Today, 52 years later, one dollar costs 0.88 Swiss francs! That means the dollar has fallen 80% against the Swiss franc since 1971.<\/p>\n\n\n\n<p>So a country like Switzerland with zero deficit and very low debt to GDP proves that a well managed economy with very low inflation does not destroy its currency like most irresponsible governments do. But the Swiss system of direct democracy and people&#8217;s power (the Swiss system of direct democracy is a variation of the US federal system of democracy adapted to Switzerland&#8217;s particularities) gives citizens the right to hold a referendum on almost any issue they choose.<\/p>\n\n\n\n<p>This makes the people much more accountable to their choices, as a winning vote on any issue becomes part of the constitution and cannot be changed by the government or parliament. Only a new referendum can change such a decision.<\/p>\n\n\n\n<p>Swiss debt to GDP is currently around 40%. This was the level of US debt in 1971, before the gold window closed. US debt to GDP in 2000 was 55%. Today, US debt to GDP is 132%.<\/p>\n\n\n\n<p>132% debt to GDP is the level of a country frantically trying to survive by printing and borrowing ever-increasing amounts of useless money. So debt to GDP in the US is now reaching the exponential phase. Since there is no intention or ability to reduce the US deficit, the likely deficit for the next fiscal year is likely over $2 trillion.<\/p>\n\n\n\n<p>The combination of geopolitical and economic risk makes wealth preservation an absolute necessity (please read the analysis entitled &#8220;<a href=\"https:\/\/liberalglobe.com\/?p=17014\">The Co-integration of Foreign Policy and Public Debt is leading the USA to &#8220;Bankruptcy<\/a>&#8220;).<\/p>\n\n\n\n<p>Most asset markets look extremely vulnerable, be it bonds, stocks or real estate. Few investors understand that current asset prices are a bubble as a result of an unprecedented credit expansion.<\/p>\n\n\n\n<p>So we are at a point where asset markets could burst like bubbles. But this today is not a matter of speculation, but a matter of survival. Unfortunately, most investors are more likely to buy on the dip and lose most of the gains they made over the past few decades.<\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;There is no way to avoid the collapse of a system that has expanded more than it was allowed to because of manorial credit&#8230;<\/p>\n","protected":false},"author":1,"featured_media":17022,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[859,5,961],"tags":[239,1983,242,877,380,5109,70],"class_list":["post-17021","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","category-economic","category-financial-economics","tag-dollar","tag-economy","tag-gold","tag-interest-rates","tag-public-debt","tag-us-debt","tag-usa"],"_links":{"self":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/17021","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=17021"}],"version-history":[{"count":4,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/17021\/revisions"}],"predecessor-version":[{"id":17027,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/17021\/revisions\/17027"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/media\/17022"}],"wp:attachment":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=17021"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=17021"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=17021"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}