Best of the Week
Most Popular
1.Stock Market Crash and Recession Indicator Warning: Extreme Danger Ahead - Harry_Dent
2. Is This How World War III Begins, In Almost Complete Silence? - Jeff_Berwick
3.Trump Wins 2nd Presidential Debate, Betfair Betting Markets Odds Bounce - Nadeem_Walayat
4.Why Krugman, Roubini, Rogoff And Buffett Dislike Gold - GoldCore
5.End of SPX Stock Market Correction Nears - Tony_Caldaro
6.Get Ready for the Future - Exponential Machine Intelligence Mega-trend towards Singularity - Nadeem_Walayat
7.US Housing Market Bubble II – It’s Happening Again! - Andy_Sutton
8.FTSE BrExit Stock Market Panic Crash Resolves towards New All Time Highs - Nadeem_Walayat
9.Can Trump Still Win Despite Opinion Polls, Bookmakers and Pundits all Saying Hillary has Won? - Nadeem_Walayat
10.Gold’s, Miners’ Stops Run - Zeal_LLC
Last 7 days
This Past Week in Gold - 24th Oct 16
Can Gold Continue To Rise, Since The Usd Is Moving Higher Too? - 24th Oct 16
Why are Americans Avoiding the Stock Markets; Fear or Lack of Money? - 24th Oct 16
The US Is NOT a Low-Tax Jurisdiction - 24th Oct 16
Stocks, Crude Oil and EURUSD Trend Forecasts - 24th Oct 16
Stock Market Another Month to Go? - 24th Oct 16
Large Sell-off in Stock Market Looming - 24th Oct 16
Ungovernability - 24th Oct 16
Stock Market Boredom Before The Storm - 24th Oct 16
Establishment Mainstream Media Elite Buys US Election for Hillary Clinton, Time Running Out for Trump - 23rd Oct 16
Inflation About To Explode Higher - 22nd Oct 16
Still waiting for SPX uptrend to kick off - 22nd Oct 16
Will a Rising US Dollar Crush Gold’s Fledgling Bull? - 22nd Oct 16
Why The Global Economy Will Disintegrate Rapidly Back to Olduvai Gorge - 22nd Oct 16
GLD Bleeds Out; Weekly Gold Update - 22nd Oct 16
Stock Market Investment Success Through the “Investment Rule of 72” - 21st Oct 16
The Final Bottom in Gold - WHEN - 21st Oct 16
Gold Green Lights Upleg - 21st Oct 16
Demand for US Mints Silver Eagles has ‘Returned with a Vengeance’ - 21st Oct 16
Central Bankers Can't Stop The Death Blow Of The Post US Election Recession - 21st Oct 16
The Fortune at the Bottom of the Pyramid: Golden Opportunity for Frontier Asia - 21st Oct 16
Have You Taken These 4 Simple Steps to Improve Your Trading? - 21st Oct 16
The Stock Market is an Accident Waiting to Happen - 20th Oct 16
It's Rally Time for Gold and Silver Equities - 20th Oct 16
Cashless Society – Risks Posed By The War On Cash - 20th Oct 16
China's insane Housing Market Will Tumble and Crash in 2017 - 20th Oct 16
Donald Trump Bounces Going into 3rd and Final US Presidential Election Debate - 20th Oct 16
Attention Please: Phase Two of the Gold and Silver Train Now leaving the Station. All Aboard? - 19th Oct 16
How to Successfully Trade a Stock Market Crash - Black Monday October 19th 1987 - 19th Oct 16
Tesla, Apple and Uber Push Lithium Prices Even Higher - 18th Oct 16
Silver, Debt, and Deficits – From an Election Year Perspective - 18th Oct 16
UK Property Market: Slow Growth Does Not Equate To Decline - 18th Oct 16
Trump Election Victory is in Your Power - 18th Oct 16
Stock Market More to Come! - 18th Oct 16
This Past Week in Gold and Silver - 17th Oct 16
A Falling Stock Market Cannot Be Allowed - Financial Repression Is Now “In-Play”! - 17th Oct 16
Commodities, Forex and Stock Market Trend Forecasts - 17th Oct 16
Stock Market Crash..or No Crash? - 17th Oct 16
A perspective on risk rally – Risks abound but Stock Market is Confident - 17th Oct 16
Bank of England Blames Brexit for Sterling Drop Inflation, Masks QE Money Printing Cause - 17th Oct 16
From Piety to Pride to Pity, America's Racial Divide - 17th Oct 16
Is Obama Juicing US Government Spending To Get Hillary Clinton Elected? - 16th Oct 16
Seek Your Independence: Anything Else Will Destroy You - 16th Oct 16
SNL - US Presidential Debates, 1st, 2nd, VP - Like You've Never Seen them Before! - 16th Oct 16
End of Economic Growth Sparks Wide Discontent - 16th Oct 16

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

LEARN to Trade

A Silver Lining For When Currency Dies

Commodities / Gold and Silver 2012 Oct 29, 2012 - 01:18 PM GMT

By: Dr_Jeff_Lewis

Commodities The global economy seems to be on a one way path to eventual destruction as interest continues to accumulate on the massive word-wide debt.

Budget and trade deficits keep growing, but unfortunately without an engine for real and sustainable growth.

Furthermore, the amount of interest keeps rising, while raising interest rates is not an option like it was to fight the notable inflation of the late 70's after the Dollar was taken off the gold standard by Nixon earlier in that decade.
Not only is a meaningful reduction in deficit spending just not politically feasible, but no real pain is felt from perpetual borrowing given such historically low borrowing rates.
Debt Monetization

The Fed is not yet directly buying equities or corporate bonds to prop them up like Japan is doing. Nevertheless, the Fed is buying almost 100% of all long-dated (10 year +) bond issuance, and has been since the first Operation Twist program began.

Since Treasury debt with a tenor of three years or less is basically equivalent to currency (Zero Interest-Rate Policy or ZIRP through 2015), the Fed is effectively monetizing all of the inflation-risk Treasury debt.

Nevertheless, this policy is also shooting itself in the foot since the Fed wants some inflation, yet its policy is muting increases in the primary inflation signal, i.e. the long bond rate, since deficit funding is really all that matters for policymakers like Bernanke.

Once the country’s economic system is unable to naturally expand at an exponential rate, the liabilities will basically become unfunded.  The only real choice at that point will be how many of the unfunded liabilities will have to go into default and how assets are liquidated to pay creditors. 

It's all a Balance Sheet

Another possibility is that the monetary authorities could print currency like crazy to make up the differences and officially attempt to reduce the debt burden.  Of course, this would lead to further devaluation of their currency.

History has shown that humans are no further down the evolutionary path in this regard. This paper currency system will eventually collapse since interest is attached to the medium of exchange. Basically, building a monetary system based on "interest" or debt will eventually fail, just like all previous debt based monetary systems have collapsed.

What will be left when the dust clears after this monetary collapse, will be the few hard assets that have not already been re-hypothecated by banks and brokers. Gold and silver happen to be the only hard currencies available to most investors, and silver even more so than gold. 

But not for long. As Voltaire once observed back in 1729, “Paper money eventually returns to its intrinsic value — zero.”

For more articles like this, and to stay updated on the most important economic, financial, political and market events related to silver and precious metals, visit

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of and

    Copyright © 2012 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2016 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife