Best of the Week
Most Popular
1.Stock Market in DANGER of Strangling the Bears to Death - Nadeem_Walayat
2. Germany Pivoting East, Exit US Dollar, Enter Gold Standard - Jim_Willie_CB
3.Flight MH17 – Kiev Flash Mob's Last False Flag? - Andrew_McKillop
4.Stock Market Crash Nightmare! - Nadeem_Walayat
5.Gold - The Million DOLLAR Question... - Rambus_Chartology
6.Gold And Silver – BRICS And Germany Will Pave The Way - Michael_Noonan
7.The Jewish Selfish Gene, People Chosen by God, Everyone Else is Goyim to Kill - Nadeem_Walayat
8.The Israeli Promised Land Dream - The Criminal Roadmap Towards “Greater Israel”? - Felicity Arbuthnot
9.Which Way is Inflation Blowing? Watch Commodities - Gary_Dorsch
10.U.S. Economy Quarterly Review and Implications for 2014-2015 - Lacy Hunt
Last 5 days
What It Means - Paradigm Collapse And Culture Crisis - 27th July 14
Wall Street Shadow Banking: You Can’t Taper a Ponzi Scheme: “Time to Reboot” - 27th July 14
6 Tips for Picking Winning Gold Mining Stocks - 27th July 14
Israel's War on Children, Exterminating the Palestinians Future - 27th July 14
Guilt By Insinuation - How American Propaganda Works - 26th July 14
Surprise Nuclear Attack On Russia To Liberate Ukraine - 26th July 14
Use "Magic" Of Gold/Silver Ratio To Greatly Increase Your Physical Holdings - 26th July 14
Derivatives Market Species Origins - Abuse, Props and Risks - 26th July 14
Stock Market Manipulation and Technical Analysis - 26th July 14
China’s Stock Market Finally Looks Like A Buy - 26th July 14
Ed Milliband Fears Israel Jewish Fundamentalist Gaza War Massacres Backlash - 26th July 14
The Big Energy = Power Battle Is Coming - 25th July 14
USrael - Zionists in Control of America's Goyim Brainwashed Second Coming Slaves - 25th July 14
More Weakness Ahead for Gold Miners - 25th July 14
Gold Price Strong Season Starts - 25th July 14
Geopolitics and Markets Red Flags Raised by the Fed and the BIS on Risk-taking - 25th July 14
Gold Lockdown Until Options Expiry - New Singapore Gold Contract Threatens Price Manipulation - 25th July 14
The Bond Markets, Black Swans, and the Tiny Spirit of Santo - 25th July 14
No Road Map For Avoiding The Future - 25th July 14
Israeli War Machine Concentrating Women and Children into UN Schools Before Killing Them - C4News - 25th July 14
Israeli Government Paying Jewish Fundamentalist Students to Post Facebook Gaza War Propaganda - 25th July 14
Why the Stock Market Is Heading For A Fall - This Time Is Not Different - 25th July 14
An Economic “Nuclear Strike” on Moscow, A “War of Degrees” - 25th July 14
BBC, Western Media Working for Israeli Agenda of Perpetual War to Steal Arab Land - 25th July 14
Ukraine: What To Do When Economic Growth Is Gone - 24th July 14
Stock Market Clear and Present Danger Zone - 24th July 14
The Five Elements to Creating a Something-for-Nothing Society - 24th July 14
Instability is the New Normal? - 24th July 14
Israel's Suicide Bombers Over Gaza - 24th July 14
EUR-AUD Heads Into The Danger Zone - 24th July 14
Tesco Supermarket Death Spiral Accelerates as Customers HATE the Mega Brand - 24th July 14
Ukraine MH17 Crisis - Best Remember Who Your Friends Are - 24th July 14
Three Reasons Why Gold Price and Gold Stocks Will Rise - 24th July 14
HUI Gold Bugs Fighting To Break Downtrend - 23rd July 14
What Putin Knows About Flight MH17 - 23rd July 14
Why Microsoft Will Continue to Rebound, Huge Upside Potential - 23rd July 14
Will Putin Survive? - 23rd July 14
MH17 Crash Next Phase Economic Warfare - 22nd July 14
The TRUTH about China’s Massive Gold Hoard - 22nd July 14
Forex Multi-week Consolidation in EUR/USD Ended - 22nd July 14
Bitcoin Price Medium-term Trend Being Tested - 22nd July 14
Beware Of The Flash Mob - 22nd July 14
Can Putin Survive? - 22nd July 14
Israel Assault on Gaza: A Historic Crime, Nazi Like Final Solution - 22nd July 14
Zionist Israel an International Pariah - 22nd July 14
Reflections on the Global Misery Index - 22nd July 14
GDP Economic Statistic : A Brief But Affectionate History - 22nd July 14
TransTech Digest: Super Battery Bio-Power vs. Dirty CleanTech - 21st July 14
How to Find Trading Opportunities in the Currency Markets - 21st July 14
Stock Market One More Pull Back - 21st July 14
The Conquest Of Real - Degenerate Philosophies of the Book - 21st July 14
A Clear Way to Profit from a Graying Population - 21st July 14
Last Chance Critical Financial Market Forecasts Special Total Access - 21st July 14
Stock Market Crash Nightmare! - 21st July 14
Why the Stock Market Is STILL Cheap - 21st July 14
From Gore-Bore To Gore-War - 21st July 14
Gold Price Looking Drab - 21st July 14
An In-Depth Look at Gold Chartology - 21st July 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Fed Impact on Stock Market Trend

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