Best of the Week
Most Popular
1.UK General Election 2015 - Forecasting Seats for SNP, LIb-Dems, UKIP and Others - Nadeem_Walayat
2.UK General Election 2015 Seats Forecast - Who Will Win? - - Nadeem_Walayat
3.Gold Price Downtrend Looks Set to Continue - Clive_Maund
4.Commodity Prices Set To Plunge Below 2008 Lows - Austin_Galt
5.New Greece Drachma Revealed Amid Bank Runs - Greeks Buy Gold Sovereigns - GoldCore
6.Gold and Silver Stocks or General Stock Market Indices? - Rambus_Chartology
7.“Forgive Us Our Debts” – Only Way To Prevent Economic Meltdown - GoldCore
8.UK House Prices Trend 2015 and the May General Election - Nadeem_Walayat
9.12 Reasons Why Barry Ritholtz and Many UK Experts Are Mistaken On Gold - GoldCore
10.Recession is On The Way; Beat The Stock Market Crowd, Panic Now! - Mike_Shedlock
Last 5 days
Gold and Silver Justice For Some - Currency Wars - ECB Deposit Rates To -3% - 5th Mar 15
How to Play the Big Broker Stocks When Interest Rates Rise - 5th Mar 15
Here's What Stock Market Bulls Might Be Overlooking - 5th Mar 15
U.S. Soaring Crude Oil Stocks - Cushing and Gulf Coast Storage Filling Up Fast - 5th Mar 15
Japan's Intelligence Reform Inches Forward - 5th Mar 15
Gold Miner Index Breadth Oscillator, Forward Reckoning® - 5th Mar 15
Gold Price Set To Plunge Below $600 - 5th Mar 15
UK General Election Forecast 2015 - Immigration Crisis, SNP Insurgency and Housing Mini-Boom - 5th Mar 15
Spock, Debt and the Kingdom of Denmark - 5th Mar 15
The Psychology of a Sideways Stock Market Trend - 5th Mar 15
Freedom from America - Getting Out Of Dodge - 5th Mar 15
What Top Hedge Fund Managers Really Think About Gold - 4th Mar 15
U.S. Dollar Strategic Backfire On U.S. Government Policy - 4th Mar 15
Canada’s Central Banks Orders End to ‘Spocking’ Of Canadian Dollar - Defacing Debasing Currencies - 4th Mar 15
Chicago's Only Possible Salvation: A Detroit-Like Bankruptcy - 4th Mar 15
Gold Price and Mining Stocks Decline Together - 3rd Mar 15
Financial Slaughter - The Silence of the Lambs - 3rd Mar 15
Bondholders “Bailed In” In Austria – New Banking Crisis? - 3rd Mar 15
How to Profit from the Coming Oil Price Crunch - 3rd Mar 15
Is Japan Zimbabwe? Could Japan go Hyperinflation? - 3rd Mar 15
Bill Gross Says Fed May Raise Rates 25 Basis Points in June - 3rd Mar 15
The Secret Behind My Hedge Fund Trade on U.S. Housing Market - 3rd Mar 15
BLS CPI Lie - How's That Dsflation Working Out for You? - 3rd Mar 15
Tesla Bonfire of the Money Printers’ Vanities - 3rd Mar 15
Gold Demand in UK, Europe and U.S. – Reuters Interview GoldCore - 2nd Mar 15
Watch the Skies... for Investor Profits - 2nd Mar 15
How Investors Can Identify the Best Small-Cap Stocks - 2nd Mar 15
Gold and Silver - What If the Precious Metal Stocks Bulls are Back - 2nd Mar 15
Students Getting a PhD in Subprime Debt - U.S. Debt Breaking Bad Part 3 - 2nd Mar 15
The Stock Market is in The Process of Major Top! - 2nd Mar 15
Stock Market Weakening Trend - 2nd Mar 15
Gold Price Glimmer of Hope - 1st Mar 15
Stock Markets Are Riding High on Thin Air - 1st Mar 15
Varoufakis vs. the Troika - Showdown in Athens - 1st Mar 15
Subprime Rising - U.S. Debt Breaking Bad Part 2 - 1st Mar 15
Gold CoT Improving, But ... - 1st Mar 15
UK General Election 2015 Seats Forecast - Who Will Win? - 28th Feb 15
UK General Election 2015 - Forecasting Seats for SNP, LIb-Dems, UKIP and Others - 28th Feb 15
Stocks Bull Market Continues - 28th Feb 15
U.S. Debt Breaking Bad - 28th Feb 15
NATO Frankenstein - When Centralization Scales Beyond Our Control - 28th Feb 15
Gold And Silver Insanity Prevails; Precious Metals Without Direction - 28th Feb 15
Fed Raising U.S. Interest Rates - Shovelin’ Schmitt Against the Tide - 28th Feb 15
Don't Let This Stock Market Myth Cost You Your Gains - 28th Feb 15
Recession is On The Way; Beat The Stock Market Crowd, Panic Now! - 28th Feb 15
Stock Market Indexes Creeping Towards the Edge - 28th Feb 15
GGD Going for Mexican Gold - 27th Feb 15
Foreign Real Estate Is the New Swiss Bank Account - 27th Feb 15
10 Reasons Washington Has War Fever - 27th Feb 15
Gold and the Euro Tragedy, Iraq 3.0, Ukraine Conflict Three Ring Circus - 27th Feb 15
Deepak Chopra - New Age Genius or Bullshit Expert? - Video - 27th Feb 15 - Videos
New Greece Drachma Revealed Amid Bank Runs - Greeks Buy Gold Sovereigns - 27th Feb 15
Will Month Long Stocks Rally Continue? - 27th Feb 15
The Only Public Hedge Fund You Should Own - 27th Feb 15
UK House Prices Trend 2015 and the May General Election - 27th Feb 15
Why America is Ungovernable - The Republicans’ Civil War - 27th Feb 15
Gold vs Gold Stocks: Bullish Anomaly Developing? - 27th Feb 15
I Heart Capitalism, Nasdaq Stocks, Then And Now - 27th Feb 15
The Fed’s History of Assassination - 27th Feb 15 i
Gold Bull Market Forecast - Money Will Rotate Into These Dead Investments - 27th Feb 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The State of the Global Markets 2015

Gold and the Developed World in the Face of Massive Change in the Next Two Decades

Commodities / Gold and Silver 2013 Feb 25, 2013 - 12:02 PM GMT

By: Julian_DW_Phillips

Commodities

In the last five years, we have seen the start of the decline of the developed world and the real impact of the economic rise of China on that world. What lies ahead? James Wolfensohn, the ex-president of the World Bank gave a short lecture in which he forecasts what the world's cash flows would be like in 2030:


  • For the last century and far more, 80% of the cash flow of the world flowed to what we know as the developed world where 20% of the people lived. Twenty percent of the cash flow went to the underdeveloped world where 80% of the world's population lived.

  • By 2030 these numbers will have changed dramatically, with 35% of the cash flow of the world going to the developed world and 65% of the world's cash flow going to the 'emerging' world, primarily China and India.

  • In addition, he says that there will be 1 billion middle class people in China by 2050 - a figure we had previously put at 300 million. This is more than the total population of the U.S.A. and the Eurozone put together. Worldwide there will be 3 billion people in the middle classes with two thirds of them in Asia.

Think for a moment what this will mean to you individually and the world in which you live. Unless one tries to understand them, we will become a victim of the changes. The ramifications are vast; they become almost impossible to detail in advance. We can forecast principal and principle changes but will almost certainly be wrong in specific details. We then look at the changes that will affect the precious metal worlds, but even here we can only make broad sweeps.

Uncertainty & Instability

We can be absolutely sure that man cannot weather these changes without uncertainty and instability on a scale not seen since the World Wars. This is the first ingredient that we must factor into the future and man's way of coping.

The fact that the Prime Minister of Britain has taken a huge delegation this week to India shows that the developed world is starting to try to adapt to these coming changes. Britain is even minting gold sovereigns, a coin with emotional connotations in India. But we do not see Asia turning to the developed world as partners in the future. The pattern to date has to mimic the developed world's skills, and then do it cheaper at home, exporting the products back to the people who taught them at a lower price! So the wealth and power of the developed world seeps across to the East and will continue to do so until emerging world income rises to the same level as developed world income or developed world income fall to that of the emerging world.

It's clear that Asia is not an ally of the developed world nor are they committed to helping the developed world. The saying is true that nations have interests, not friends. This will be the case between the two sides of the world. Asia sees its first priority in lifting itself up and using developed world markets to help do that.

The developed world may see only flat growth in the medium-term, reminiscent of the postwar-era when Britain, with its outdated equipment, was quickly overtaken by Japan, where after the war everything was built new, from scratch. Both China and India are in a similar position now. As a result, manufacturing will continue to go east.

As the pressure grows on the developed world, the developed world may be pressured into protectionism to survive. The initiation of the U.S./European Free Trade Zone this month is the start of such survival techniques. Consequently, economic pressures will escalate into tension between East and West in global trade. The arrival of the Yuan onto the global stage will exacerbate these.

Change in the Monetary World

But the direct point of impact of these growing pressures will be in the monetary world. This was highlighted last week in the G-7 and G-20 meetings where quantitative easing was justified and its direct impact on the exchange rates minimized. This attitude directly undermines stability in foreign exchanges and, worse still, makes acceptable the undermining of the foreign exchange rate system itself and the need for currencies to be reliable measures of value. We have no doubt that the self-interested positions that this demonstrates will continue to grow and worsen to the detriment of the global economy. After these statements, we're seeing sterling continue to fall. Expect to see the Yen fall to 100+ against the USD.

Since the last war the developed world has interlinked with the U.S. in a tight knit monetary system based on the dollar, the only currency with which to buy oil. With Asia rising and with the Yuan shortly to make its appearance on the global reserve currency table, the dollar will lose a great deal of its control over both oil and the global monetary system. It will retain its hold over O.P.E.C. but not over Russia and if it agrees on a defined trading range between the euro and the dollar will ensure Europe pays for its non-European oil in dollars still. It's likely, however, that Russian sales of oil and gas to Europe will be made in Rubles or euros, not dollars. Therefore, there will be a loosening of both the U.S. grip over oil supplies and the dollar's grip over the monetary world.

We cannot see the developed world willingly cooperating with any demands made by rising Asia as this will probably be at the expense of the West's influence and power over the monetary system.

For instance, in order for Asia to get the voting power it would warrant in line with its rising power, it would request that it get a good chunk of the voting power. It would also request that the I.M.F. lower the number of votes needed to pass a resolution from 85% to say, 70% with it getting a similar number of votes as the U.S. Its alternative is to set up an equivalent body to the World Bank and the I.M.F. - a process it has already started.

Overall expect to see the world fragment into a series of blocs with their trading partners reliant on them. This would inevitably lead to more protectionism and monetary fragmentation.

Alongside this and to reinforce the fragmentation and consolidation of self-interest in these groups, another worldwide development will begin. Both these blocs and all the nations left out in the cold will have to turn to Capital and Currency Controls to hold on to their country's capital. The 'carry trade' of borrowers in low interest currencies and lenders into high interest rate nations would be controlled to prevent the probable tsunamis of capital sloshing between the blocs.

The Capital controls that are seen in Iceland at the moment are the consequences of such crises. These will become increasingly common across the world.

But the most life-changing facet of these changes for the developed monetary world will be that the damage done to the credibility of the leading currencies, the dollar and the euro. They will lose their current percentages of global reserves, being replaced to some extent by the Yuan and possibly other Asian currencies.

The current weakening of the Yen, Sterling and Swiss Franc are making this point right now. This process has to continue as nations, in the cause of growth, will progressively weaken their currencies and provoke retaliation from the nations who lose their advantage because of such moves.

The process of fragmentation will create currency volatility that undermines confidence in the entire monetary system. The current discussion of a Currency War will morph into a revolution against the corporation we saw in the past and see to a large extent now. We reiterate that this entire process will be exacerbated by the arrival and growth of the Yuan as an increasingly important global reserve currency.

In turn, there will be a rising need for non-national, liquid, internationally acceptable assets that would support global currencies when used internationally. We know of only one at the moment and that is gold.

Gold Forecaster regularly covers all fundamental and Technical aspects of the gold price in the weekly newsletter. To subscribe, please visit www.GoldForecaster.com

By Julian D. W. Phillips
Gold-Authentic Money

Copyright 2012 Authentic Money. All Rights Reserved.
Julian Phillips - was receiving his qualifications to join the London Stock Exchange. He was already deeply immersed in the currency turmoil engulfing world in 1970 and the Institutional Gold Markets, and writing for magazines such as "Accountancy" and the "International Currency Review" He still writes for the ICR.

What is Gold-Authentic Money all about ? Our business is GOLD! Whether it be trends, charts, reports or other factors that have bearing on the price of gold, our aim is to enable you to understand and profit from the Gold Market.

Disclaimer - This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold-Authentic Money / Julian D. W. Phillips, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold-Authentic Money / Julian D. W. Phillips make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold-Authentic Money / Julian D. W. Phillips only and are subject to change without notice.

Julian DW Phillips Archive

© 2005-2015 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

Free Report - Financial Markets 2014