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Global Trade: The War of the Throne

Economics / Global Economy Apr 13, 2020 - 04:05 PM GMT

By: Stephen_Merrill

Economics Now scribers, hear the tale of the mightiest battle of humankind.  It is the war over the throne of global trade.  The ongoing duel between the Rightful King and the Irresistible Force.

With the Joker in the mix now, too.

Five Millenia of Global Trade

What tamed the tribalistic human into a more civilized state long ago was the logic and obvious benefits of trade and travel.  From its very beginning, the global means-of -exchange facilitating trade was ultimately gold and its monetary stepchild silver.  Even when Western Europeans traded with China, India and many others, the primacy of gold and silver was easily adopted by both sides based on their separate tradition.

Gold cannot be manufactured or invented.  There will always be a limited supply of gold that grows only slowly year to year.  Gold and silver bullion cannot be faked.  It is flexible in its size and use and transport. It does not degrade or greatly devalue.

These enduring universal qualities bestowed on gold the precious crown and throne of global trade.  Gold was the indisputable store-of-value accepted by all people.  All payments were measured in gold or silver, the only true money.

Gold’s reign proved to be benevolent, even revolutionary for the bottom-up in society.  Gold did not discriminate against who became its owner.  Gold only required the new owner to be a productive or resourceful person in some way.  Gold punished liars and rewarded the frugal.  Gold punished profligate spending, especially official spending, especially on warfare.

Empire after empire offered it currencies that rose and fell.  Yet, in the end of things, global trade accounts were settled in gold across millennia.  The Throne always ruled.  There was no substitute conceivable.

Many governments defied the Throne across history in many places.  Some just cheated on the content given to coinage, like Ancient Rome did.  Many tried to substitute for gold with unbacked paper currencies, fiat currencies.  All failed ignominiously.  The most famous episodes to Western minds was the hyperinflation blowout of Revolutionary France and of Weimar Germany. 

The Framers of the US Constitution vilified paper money.  They thought they had outlawed paper money for all time anointing gold and silver as the only true money.

Modernity and its Fatal Pretense

Even the most basic underpinning of society can be placed into question during transitory times, like after major wars redrawing society.

It is the conceit of perceived modernity that so often can turn the human mind to great mistakes too, beyond any revelations reached that do advance human progress.

These are typically the very mistakes of human character that will always recur in some ways.  Principal among these mistaken choices is the global triumph of paper money printing since WWII.  The evil within it is now long amok in the greatest nations of history.

A Great Wizard Seizes the Throne

When WWI drained the British Empire into insolvency, the long rule of English Sterling as the primary global currency slowly collapsed into the waiting arms of the United States Dollar, merging currency dominance with the largest gold reserves in monetary history.  That US gold reserve by the end of WWII had risen to two-thirds of the recorded global supply of gold.

British Empire finance in war and depression had also relied on paper money for too long, lending greatly to the pound sterling’s demise as the main patron of the Throne.

The end of WWII only strengthened the position of the US Dollar in global trade, the new leader in all ways.  The Leviathan ruled over all currencies.  Subject to the ultimate authority of the Throne, of course.

The 1944 Bretton Woods Treaty established a partial gold standard convertible from USD only, pegged at $35/ounce.  This kept global currencies in line too since so much trade was made in USD payments.  Everything on Main Street boomed for almost 30-years.

There was no power on Earth the Wizards behind the USD could be denied, except its connection to the Throne. The growing US empire spent any sum needed anywhere, especially on warfare.

By the 1960’s, with the Vietnam war expenses alongside a new entitlement state, the USD’s chain to gold became too much to bear.  First, the London Gold Pool simply closed down, due to an overvalued dollar, and was never effectively replaced.  Almost no gold changed hands any longer from that time.

Then in 1971, with no treaty talks underway, the Top Wizard in Washington suddenly deposed the King from the Throne altogether, casting gold to the edge seemingly. The Nixon Shock was the first time all global currencies would lack convertibility to gold or silver.  That tie has yet to be restored by any nation.  A footnote is that JFK, in 1963, was thought to have under implementation a much larger official monetary role for silver, and ultimately gold, backstopping the USD.

There was no vote made to depose the Rightful King from the Throne, not even in the US.  This was the Silent Great Betrayal against honest money and finance and personal liberty.  The Fair and Rightful King had been deposed in an unlawful USD coup.

The financial disaster to be reached by the end by this policy fiasco had played out many times before.  This time the unchained money-printing has lasted for 50-years.  The debt numbers across the globe are staggering beyond belief, into laughter at best.

No one at all in 1971 came to the defense of liberty and prosperity through the gold standard.  Gold had been successfully melted down to a despised outcast by Presidential decree alone. The laughter and abuse would last until the present time.  It is about to end.

Because this 2020 black swan dive is when the time-bomb of the first global experiment with paper money has finally met its full ignition point. King USD has no clothes, for all to see now.  Federal spending deficits can be conservatively estimated at $3tr annually, maybe 15% of the lowered US GDP in total deficits, needing finance.  Things could simply crumble to numbers chaos any day. The derivative mountain is about to explode the global banks.

The use of USD to pay for US imports is being seen globally for what it is, unpayable paper debt for real products and services.  When the ocean of USD overseas does come gushing home, The Wizards will simply stumble from the Throne amid chaos, quite soon it certainly appears.  The Irresistible Force will be conquered.

The absence of any true bid now for US Treasuries at a 10-year auction brings the end game for the USD occupation of the Throne near to completion.  When Treasury interest rates begin rising beyond the Fed’s control, it rings the death knell for the USD as the global reserve currency.  The crash in value and resulting flood of USD back home will be breathtakingly quick.

In this shaken world of 2020, any number of geopolitical events, even beyond war, could invoke the global monetary shakeup into chaos very quickly, as we learn from the present black swan event.

But Who Shall Take the Throne Now? 

There is no heir-in-waiting this time as the leading global currency.

Could it become the China Yuan as the global reserve currency?  No, the Yuan has the underlying debt disease too.  As do the Euro and the Yen.

So, this means, for the present, a rollercoaster floating-rate of global currencies.  But this interlude will also fail ultimately due to insolvency and the failure of price discovery.  Only gold will be trusted then amid complete chaos.

But that may well matter little in the event of the quick alternative financing of the new multi-polar world.  The Throne could be ruled again by its Rightful King even with no favorite son currency in place.

The obvious achievable course now would be to allow a debt bomb blowout of all currencies in distress.  Global trade could be denominated in gold trade notes rather easily and quickly.  The national currencies will bounce around in value, but the anchor will finally be restored, thereby lending stability and authenticity to finance again.  Gladly, the Old Robber Barons will all be deposed.

Keeping global currencies in place but settling in gold ultimately would end the currency rollercoaster ride eventually and most of the empire abuse that underlies the FX market.  One route to billions in speculation profits untied to the real economy will have disappeared.

Since the most powerful governments presently oppose the renewal of the gold-standard fundamentally, it cannot happen yet.  However, the disintegration of the Fed now underway will powerfully push for a new Western solution now.

That is unless China and Russia establish the gold trade note as official policy, a first and necessary step. With the recent bolstering of their national supply of gold, both nations appear headed on this course possibly. A key here is to anticipate and avoid Western demolition tactics, especially in the currency markets. 

No East and West solution in a new global currency is remotely possible.  The IMF’s SDR is a group of coffin currencies.

Maybe, instead of war, the Western monetary order and military empire could fold altogether with a big move by an Eastern rush to gold providing the shove, with barely a casualty outside national borders. After all, the US has the greatest store of gold of all empires, according to legend, with Europe just behind.

This epochal breakdown of the fiat currency world would be similar in its nature to the sudden dissolution of the rotten structure of the old Soviet Union 30-years ago, even inside Russia.

The Rightful King could retake the Throne then, in this best-case scenario for the world.  This is also, by the way, the best-case scenario for global peace, even lasting global peace.  Ditto for US citizens now and forever.

But there is a potential candidate for the Throne to throw into this mix. The upstart seems far too young and untested to rule.  Yet, it has the advantage in certain ways that have ruled the world for so long, along with enjoying the enchantment of the young.

Can Cyber Currency by Secret Algorithm Rule Global Trade Instead of Gold?

Bitcoin and the many cyber currencies do represent in a speculative way the monetary reset back to honest finance so needed, cyber-certificates issued in a guaranteed limited supply. Presently, these certificates issued along a chain-of-title also have the great advantage of being supplied by the private-sector, instead of issued by governments.  Only if: All money was issued in the private-sector could honest money truly rule!

Yet, the many booms and busts in cyber currency so far is as terrifying as the secret algorithms are mysterious.  Where is price discovery for the jigsaw of cyber currencies? Is there truly a limited supply?  There must be a Wizard somewhere, somehow, No?  if you do make a lot of money in cyber currency, will the governments of the world swipe it away in the next crackdown, easy as pie?

When it comes to physical security of monetary holdings, it seems bulky gold and silver have the advantage over the upstart, despite physical storage costs.  Wild West style ripoffs of cyber funds held in cyber vaults are frequent occurrences: far more frequent than big gold heists.  Fake cyber certificates also endanger even the careful buyer.  Even in a mass surveillance world, the storage and ownership of gold can be a tough puzzle to crack by the spy agencies.

The advent of quantum computing will make all cyber security for currency an easy target for scammers of all notions.  One could never truly melt down gold or silver to nothing.  Cyber warfare demolishing the use of cyber currencies would not greatly affect the gold trade.

Worst of all, cyber currencies thus far lack three characters of the gold trade that are fundamental to success in the Throne.

1. The future supply of cyber currency is prophesized but remains hidden in secret cyber-code that may, or may not, be subject to manipulation. Who is able to know whether the algorithms are being used for private advantage?  Is the system truly autonomous?  Who is all of this trust being placed with?  Where is the transparency on all of this?

By comparison, gold is a definite known quantity and transparent as it can be.  Gold has zero third-party risk, like a government shutdown, cyber warfare and spying or the sudden loss of prestige as a currency.  Gold has no master at all, in the end.  It is valuable jewelry, if nothing else.

2. There is no tie by cyber currencies to a physical asset with great value independent of its use as a monetary asset.  Cyber currency is fiat currency too, unlike gold and silver. Truly a Joker then.

3. 5000 years of successful use as money across a drastically changing globe is unparalleled in its attraction and universal acceptance and trustworthiness.  As is the natural attraction to possessing gold.

Aside from storage and transportation costs, cyber currencies have no inherent advantages over gold, unlike the reverse case outlined here.

So, even on a balanced field with no great lead in sentiment, one that already exists, gold is the winner over a cyber certificate on monetary grounds.  It is the most level, transparent, safe playing field for all.

But there is no level field in play now. 

The Last Stand of the Globalists

What could make cyber currency a global trade-standard player nonetheless is the determination of global governance to end the private issuance character of cyber currency: To occupy the field instead with official cyber currency.  That route, of course, is just a reset along the road to new disaster in the end.  It is today the potential parachute for the ruling elite to transition from the global bankruptcy it has caused.

This path leads to an end for private-sector cyber crypto issuance, by criminal prohibition if not by some less stern path.

Theoretically, if national governments were to unite on such a plan and impose the new regimen quickly across the world, the Rightful King could be denied the Throne again and suppressed once again in its service to the average worker and family and business. 

Or maybe the fairy tale of cyber money would come true and, at best, share the great qualities of gold and silver as real money. The sponsors will now be the old Globalists with their barker entourage, pied pipers for the young and super-connected digitally.

Or maybe the New Monetary Order becomes the old idea of the wealthy buying off the government class in order to rule the masses in thought and deed and pocketbook.  That is the sad human history that gold is so effective in pushing back against.

It seems China on this point is the hair-trigger, as it is with the potential use of the gold note trade.  Should China revolt against USD using a new official cyber currency, a big new, dashing player on the old field of global currencies will be in play.  Others will have to quickly join.  Or not join.

Gold will remain in contention for the Throne though as the true article and the Rightful King. So will private-sector issued cyber currency, if allowed to.

Any lie by China about a true tie to gold in a goldish Yuan will be rightfully exposed and debunked.  There is now, at least, an alternative media, where truth in its raw form is easily known by all.

Besides, with the USD falling from the Throne and chaos ruling, there is no time for new government issued cyber currencies. Any such launch may well meet the fate of the recent efforts of Venezuela and Iran in this direction, even if done by China.  Putin’s Russia would never go along with China on this adventure, opposing it in the end.

There is Only One King

The Euro is insolubly bankrupt and could quickly disappear.  The Yen has the most absurd debt numbers in the world. These currencies are not credible partners to any global monetary reset.  Neither is the Yuan and other national currencies. The old debts must be largely forgotten in the global reset.

The fiat currencies and sovereign bonds can rise or sink on their own then, with the free market having the authority over their value, as counted in gold and other commodities primarily.

As will the top 1%, swim or sink on their own now. With their fortunes at great risk.

At least the old style of market-rigging and sheeple fleecing will be gone forever, along with its top predators.  The financialization of Western society will shrink to a proper size of about 8% of GDP instead of the present 24%.  It will lead to a world where an investment return can be reliably made only on delivering real products and services for people’s use and enjoyment, not the weapons of war nearly so much.

So, Long live the King in its Renewal to the Throne, However it Occurs! 

Justice may then rule again with liberty as the core!


Mr. Merrill, a practicing Alaska attorney, served in the Navy Judge Advocate General’s Corps and as a Navy Reserve Intelligence Officer.

Mr. Merrill is the editor of the Alaska Freedom News, formerly the Hampton Roads Freedom News.

Copyright © 2020 STEPHEN MERRILL - 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.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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