Best of the Week
Most Popular
1. Five Charts That Show We Are on the Brink of an Unthinkable Financial Crisis- John_Mauldin
2.Bitcoin Parabolic Mania - Zeal_LLC
3.Bitcoin Doesn’t Exist – 2 - Raul_I_Meijer
4.Best Time / Month of Year to BUY a USED Car is DECEMBER, UK Analysis - Nadeem_Walayat
5.Labour Sheffield City Council Election Panic Could Prompt Suspension of Tree Felling's Private Security - N_Walayat
6.War on Gold Intensifies: It Betrays the Elitists’ Panic and Augurs Their Coming Defeat Part2 - Stewart_Dougherty
7.How High Will Gold Go? - Harry_Dent
8.Bitcoin Doesn’t Exist – Forks and Mad Max - Raul_I_Meijer
9.UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall - GoldCore
10.New EU Rules For Cross-Border Cash, Gold Bullion Movements - GoldCore
Last 7 days
Bond Market Bear Creating Gold Bull Market - 19th Jan 18
Gold Stocks GDX $25 Breakout on Earnings - 19th Jan 18
SPX is Higher But No Breakout - 19th Jan 18
Game Changer for Bitcoin - 19th Jan 18
Upside Risk for Gold in 2018 - 19th Jan 18
Money Minute - A 60-second snapshot of the UK Economy - 19th Jan 18
Discovery Sport Real MPG Fuel Economy Vs Land Rover 53.3 MPG Sales Pitch - 19th Jan 18
For Americans Buying Gold and Silver: Still a Big U.S. Pricing Advantage - 19th Jan 18
5 Maps And Charts That Predict Geopolitical Trends In 2018 - 19th Jan 18
North Korean Quagmire: Part 2. Bombing, Nuclear Threats, and Resolution - 19th Jan 18
Complete Guide On Forex Trading Market - 19th Jan 18
Bitcoin Crash Sees Flight To Physical Gold Coins and Bars - 18th Jan 18
The Interest Rates Are What Matter In This Market - 18th Jan 18
Crude Oil Sweat, Blood and Tears - 18th Jan 18
Land Rover Discovery Sport - Week 3 HSE Black Test Review - 18th Jan 18
The North Korea Quagmire: Part 1, A Contest of Colonialism and Communism - 18th Jan 18
Understand Currency Trade and Make Plenty of Money - 18th Jan 18
Bitcoin Price Crash Below $10,000. What's Next? We have answers… - 18th Jan 18
How to Trade Gold During Second Half of January, Daily Cycle Prediction - 18th Jan 18
More U.S. States Are Knocking Down Gold & Silver Barriers - 18th Jan 18
5 Economic Predictions for 2018 - 18th Jan 18
Land Rover Discovery Sport - What You Need to Know Before Buying - Owning Week 2 - 17th Jan 18
Bitcoin and Stock Prices, Both Symptoms of Speculative Extremes! - 17th Jan 18
So That’s What Stock Market Volatility Looks Like - 17th Jan 18
Tips On Choosing the Right Forex Dealer - 17th Jan 18
Crude Oil is Starting 2018 Strong but there's Undeniable Risk to the Downside - 16th Jan 18
SPX, NDX, INDU and RUT Stock Indices all at Resistance Levels - 16th Jan 18
Silver Prices To Surge – JP Morgan Has Acquired A “Massive Quantity of Physical Silver” - 16th Jan 18
Carillion Bankruptcy and the PFI Sector Spiraling Costs Crisis, Amey, G4S, Balfour Beatty, Serco.... - 16th Jan 18
Artificial Intelligence - Extermination of Humanity - 16th Jan 18
Carillion Goes Bust, as Government Refuses to Bailout PFI Contractors Debt and Pensions Liabilities - 15th Jan 18
What Really Happens in Iran?  - 15th Jan 18
Stock Market Near an Intermediate Top? - 15th Jan 18
The Key Economic Indicator You Should Watch in 2018 - 15th Jan 18
London Property Market Crash Looms As Prices Drop To 2 1/2 Year Low - 15th Jan 18
Some Fascinating Stock Market Fibonacci Relationships... - 15th Jan 18
How to Know If This Stock Market Rally Will Continue for Two More Months? - 14th Jan 18
Everything SMIGGLE from Pencil Cases to Water Bottles, Pens and Springs! - 14th Jan 18
Land Rover Discovery Sport Very Bad MPG Fuel Economy! Real Owner's Review - 14th Jan 18
Gold Miners’ Status Updated - 13th Jan 18
Gold And Silver – Review of Annual, Qrtly, Monthly, Weekly Charts. Reality v Sentiment - 13th Jan 18
Gold GLD ETF Update.. Bear Market Reversal Watch - 13th Jan 18
Stock Market Leadership In 2018 To Come From Oil & Gas - 13th Jan 18
Stock Market Primed for a Reversal - 13th Jan 18
Live Trading Webinar: Discover 3 High-Confidence Trade Set-Ups - 13th Jan 18
Optimum Entry Point for Gold and Silver Stocks - 12th Jan 18
Stock Selloffs Great for Gold - 12th Jan 18
These 3 Facts Show Gold Is Set to Surge in 2018 - 12th Jan 18
How China is Locking Up Critical Resources in the US’s Own Backyard - 12th Jan 18
Stock futures are struggling. May reverse Today - 12th Jan 18
Three Surprising Places You See Cryptocurrency - 12th Jan 18
Semi Seconductor Stocks Canary Still Chirping, But He’s Gonna Croak in 2018 - 12th Jan 18
Land Rover Discovery Sport Panoramic Sunroof Questions Answered - 12th Jan 18
Information About Trading With Alpari And Its Advantages - 12th Jan 18

Market Oracle FREE Newsletter

6 Critical Money Making Rules

Politicization, Currencies & Gold: The Lost Battle of Central Banks

Commodities / Gold and Silver 2013 Feb 06, 2013 - 08:44 AM GMT

By: GoldSilver

Commodities

Central banks have many losing battles ahead.

The world finds itself immersed in the depths of an economic crisis. This crisis however, is unlike any other experienced in recent history. What is at stake is the very foundation of our monetary system, the currency.

Today's unbacked fiat currency experiment is at the very root of an emerging global monetary problem. While the talk of "recovery" in recent months now populates headlines, the desperate actions of politicians and central bankers show the contrary.



More than ever, this saying applies: "Do not believe what they say, rather observe the actions of those who say it".

Since the onset of the "Great Recession", we have witnessed a spectacular 'dead cat bounce' in everything from stocks to real estate markets. This is undoubtedly attributable to the unprecedented currency debasement (currency expansion) launched by central banks, in addition to an explosion in government spending aimed at counter-acting the inevitable.

Since 2008, the Federal Reserve has more than tripled its balance sheet, while the US national debt has just about doubled in the same time frame. As central banks attempt to provide life support to an ailing system, the eventual outcome is evident. A system based on the unsustainable cannot be spared, as the problem itself lies in the medium of exchange which facilitates all economic activity: the unbacked fiat currency.

Recently, surfacing evidence of decelerating growth in the United States, the permanent tensions in the Eurozone, and Japan's deteriorating economic environment are but a few examples of the events that have triggered governments to move beyond their traditional spheres of influence and into the business of monetary policy. A flashing indicator that the so called 'recovery' is all but real.

Central banks across the globe have come under the influence of their respective governments like never before.

To be clear, these institutions are under siege in a battle that, by definition, they tend to lose : the battle of politicization.

Under a political methodology, a policy conflicting with government interests must be quickly altered. In today's environment, central bank mandates are falling under question by political forces who pose a short-minded resolution through limitless credit expansion (currency debasement), without thought to long-term consequences (rapid price inflation).

The latest victim of this reckless mindset was the Bank of Japan (BoJ).

Just weeks ago, the newly elected Japanese prime minister (Shinzo Abe) threatened the Bank of Japan's autonomy unless they alter their mandate by doubling their inflation target and committing to unlimited printing.

Consequently the BoJ recently announced a more aggressive stance focusing on open-ended asset purchases without a specified limit, a close reflection of the Federal Reserve's QE4 program launched in December 2012. Japan took this even further, and unlike the Fed, did not set specific parameters as to when to stop easing. Thus, it seems that Shinzo Abe's intent of limitless currency creation was accomplished without much struggle.

The Bank of Japan however, is not alone.

Jens Weidmann, President of Germany's central bank (The Bundesbank), has recently warned of the dangers of central bank politicization, claiming that this will eventually trigger a currency war (Race to Debase). Under such a scenario, every nation (claiming price 'competitiveness' as a justification) prints as fast as possible, increasing demand for its exports, while crushing the purchasing power of fiat currency savers and citizens at home.

This is nothing new to the global economy, but the tendency will accelerate with governments putting more pressure on central banks. As history proves, short-term minded politicians typically wreck an economy's long term prospects, as their visibility rarely goes beyond their election cycle.

Weidmann's statements note that among the reasons for Germany recently repatriating their gold from Paris and New York, the Bundesbank has considered the costs and implications of a currency war. It is all too clear to the German central bank that whether they like it or not, currency debasement quickly becomes a game of forced participation. One by one, they will fall like a domino effect.

This will be a significant price and demand catalyst for gold and silver.

Just like Germany did, it is just a matter of time before more and more countries demand the return of their gold bullion. No one wants to be left behind in the Race to Debase, much less in another very important race: the rush for monetary assets (gold & silver). Central banks know this very well.

A physical supply shock will eventually cause gold and silver prices to sky rocket as physical shortages are exposed and chains of re-hypothecated gold and silver collapse (via ETFs, pools, certificates, and paper gold / paper silver accounts).

Take note, today central banks face a series of lost battles ahead.

The politicization of currency and gold will offset an increasing set of consequences for paper fiat currencies.  The consequences of this will be substantial, transferring wealth away from those who have not yet protected themselves with physical gold and silver bullion.

http://goldsilver.com

Mike Maloney is the owner and founder of GoldSilver.com, an online precious metals dealership that specializes in delivery of gold and silver to a customer's doorstep, arranges for special secured storage, or for placement in one's IRA account. Additionally, GoldSilver.com provides invaluable research and commentary for its clients, assisting them in their wealth building endeavors.

© 2013 Copyright  GoldSilver - 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.


© 2005-2018 http://www.MarketOracle.co.uk - 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

6 Critical Money Making Rules