Best of the Week
Most Popular
1.U.S. Housing Bull Market Over? House Prices Trend Forecast Current State - Nadeem_Walayat
2.The Coming U.S. Economic Collapse Will Trigger a Revolution - Harry_Dent
3. Stock Market Crash a Historical Pattern? - Wim_Grommen
4.Global Panic - U.S. Federal Government Stockpiling Ammo – Here’s What We’re Going to Do - Shah Gilani
5.AI, Robotics, and the Future of Jobs - Aaron Smith
6.This is Your Economic Recovery With and Without Drugs - James_Quinn
7.Gold and Silver Price Getting Set To Explode Higher - Austin_Galt
8.The Something for Nothing Society - Lifecycle of Bureaucracy - Ty_Andros
9.Another Interesting Stock Market Juncture - Tony_Caldaro
10.Inflation vs the Deflationary Straw Man - Gary_Tanashian
Last 5 days
The Ultimate Demise Of The Euro Union - 1st Sep 14
Palladium Price Breaks Multi-Year High Over $900 - 1st Sep 14
When Complexity Becomes Chaos - 1st Sep 14
Designer War By Default - 1st Sep 14
Islamic State or Russia? Ten Key Questions Towards Pragmatism - 1st Sep 14
Mixed Emotions for the Gold Market - 1st Sep 14
These Clowns Are Dragging Us Into War with Russia - 1st Sep 14
Marx And The Capitalist Cancer Of Overproduction - 1st Sep 14
Scottish Banks Salivating at the Prospects for an Independent Scotland of 6 Million Debt Slaves - 1st Sep 14
Small Man Europe Is Now In “Effective State Of War” With Russia - 31st Aug 14
The Unintended Blowback Of False Flags - 31st Aug 14
Tesco Supermarket Death Spiral Latest Profits Warning and Dividend Slashed - 31st Aug 14
Dow, Gold and Silver - A Last Stand, A Fake Out And A Surge - 31st Aug 14
If U.S. Consumers are so Confident Why aren't They Spending? - 31st Aug 14
Scotland Independence House Prices Crash, Deflationary Debt Death Spiral - 31st Aug 14
Obama’s “Catastrophic Defeat” in Ukraine - 30th Aug 14
Stock Market Inflection Point Approaching - 30th Aug 14
Gold And Silver - Elite's NWO Losing Traction. Expect More War - 30th Aug 14
Corporations Join Droves of Americans Renouncing US Citizenship - 30th Aug 14
Peter Schiff U.S. Housing Market, House Prices Bubble Warning - 30th Aug 14
Russia, Ukraine War - It’s Time to Play the “Gazprom Card” - 29th Aug 14
The One Tech Stock Investment You Should Never Sell - 29th Aug 14
Bitcoin Price $500 as Current Downside Barrier - 29th Aug 14
Don't Get Ruined by These 10 Popular Stock Market Investment Myths - 29th Aug 14
Low Cost Transcontinental Gold - 29th Aug 14
Gold Bullish Central Banks Should Give Money Directly To The People - Helicopter Janet? - 29th Aug 14
US House Prices Bull Market Over? Trend Forecast Video - 29th Aug 14
The Fed Meeting at Jackson Hole Exposed Yellen’s Greatest Weakness - 29th Aug 14
AAPL Apple Stock About To Get sMACked - 29th Aug 14
A History of Unlimited Money: Learn From It or Repeat Its Mistakes - 29th Aug 14
How You Can Play to Win When Market Makers Are Calling the Shots - 28th Aug 14
EU Gas Supply Is In Real And Imminent Danger - 28th Aug 14
Central Banks at the Root of Evil - 28th Aug 14
European Bond Market: Bubble of all Bubbles! - 28th Aug 14
Employers Aren’t Just Whining: The “Skills Gap” Is Real - 28th Aug 14
The ISIS Menace - Just What We Need, Another War - 27th Aug 14
The Risky Business of Methane-Rich “Fire Ice” - 27th Aug 14
CFR Recommends Policy Shift that is Very Bullish for Gold - 27th Aug 14
Ukraine Standoff Signals Global Power Shift - 27th Aug 14
Stock Market Panic Decline Begins - 27th Aug 14
The Monopoly of the Government Education Cartel - 27th Aug 14
How to Invest in Silver Today for Double-Digit Gains - 27th Aug 14
The Big Solar Energy Breakthrough We've Been Waiting For - 27th Aug 14
U.S. Empire’s Bumpy Ride - 27th Aug 14
Gold Market and the Interest Rate Trap - 27th Aug 14
Stock Market Staring Into the Great Abyss - 27th Aug 14
A Look at the Coming 30-year Inflation Cycle - 27th Aug 14
Forex Trading - Will USD/CHF Rally Above 0.9200? - 27th Aug 14
Europe’s Depressing Economy Dog Days of Summer - 27th Aug 14
How The Coming Silver Price Bubble Will Develop - 26th Aug 14
A Nation of Shopkeepers - Supply-Side (Voodoo) Economics? - 26th Aug 14
Stock Market Bear Tracks Abound In Wall Street - 26th Aug 14
65,000 U.S. Marines Hold up a Mirror to the Economy - 26th Aug 14
Bitcoin Market Provides Clues for Investors - 26th Aug 14
The Key to Trading Success - 26th Aug 14
Will The US Succeed in Breaking Russia to Maintain Dollar Hegemony?... - 26th Aug 14
Even Mainstream Academia Worried about Massive Bubbles in Markets - 26th Aug 14
Iraq and Syria Follow Lebanon's Precedent - 26th Aug 14
Colonization by Bankruptcy: The High-stakes Chess Match for Argentina - 26th Aug 14
Dow Stock Index On The Cusp - 26th Aug 14
Prohibition Laws and Agency Regulations - 26th Aug 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Biggest lie in Stock Market History Revealed

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

© 2005-2014 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