27 March 2013

Gold Daily and Silver Weekly Charts - Currency Wars

I have concluded that it is almost impossible to understand what is happening in the precious metal markets without understanding that the world is in a currency war,  And this includes how the currency war is being conducted, and why.

The US dollar reserve currency arrangement to support world trade was created in the waning days of World War II, with the demise of the gold standard and the ascendancy of the Pax Americana.  It is called the Bretton Woods System.  It evolved quite a bit since then, especially when Nixon closed the gold window in 1971 and declared the US dollar a purely fiat currency.  Since then the world has gotten by on what some have called Bretton Woods II.

After sixty years, it is fairly clear that the dollar trading regime has had a good run, but has now outlasted its effective life span. The nail in the coffin is the economic instability in the US, and the need for the Federal Reserve to go to ZIRP and print buckets of money to support their domestic policy needs.

While this makes sense for the US, it does not make sense for the rest of the world. This is similar to the reason why the Eurozone is failing. The ECB conducts monetary policy to suit the needs of a few core countries, and the periphery suffers. And that monetary policy is covering up the rot at the core I might add.

The situation is similar with the dollar and world trade. The Anglo-American Banking cartel grew up around the US dollar reign, and is still very powerful, being supported by most of the systemically important international banks.

But all things come to an end, and the world is looking for a better solution to the world as it is now, not how it was sixty years ago. But change comes slowly and with difficulty.

I will be very surprised if gold and silver do not play a role in what is to come.

I did remark on this and also on bitcoin intraday. You can read it here.

Great changes are occurring, that cut across political and economic lines.  And these are manifesting as a 'currency war' that is much broader than a mere race to devalue and manipulate national currencies to support industrial trade policies.  Always keep that in mind.

Have a pleasant evening.