My readers know what I believe is at stake over the next few years is the global dysfunctional financial system, and there is only one way out, the USD must lose it's status as the global currency reserve.
I have been thinking of crypto-currencies for a while, and I am starting to think the best way out is for a virtual currency (doesn't have to be bitcoin) must become the standard-bearer of currencies, the new global reserve currency. What MUST happen is USA, Japan, Europe, hopefully (but likely not) China, and Russia agree to disagree, that NONE of them can take over for the USA as global reserve currency. That only a NEUTRAL reserve currency none of them control must be the standard bearer.
Then all currencies will trade freely against each other against the standard.
That is the only way out for the old currency system to survive to the new one. For the USD reserve currency is becoming a problem mathematically and politically for the world.
Unfortunately, I have learned the hard lesson since 2006, that when I make certain observations, the world refuses to acknowledge the new realities. Stupid world ;)
I now understand this is the way it must be.
The current system is run by politics, and political decisions must appease those who most influence those decision makers. So when a new reality hurts the them, they basically instruct the politicians to RESIST making the right changes. In fairness to the politicians, most probably have zero clue what to do is right vs wrong, and they just go along with the flow. No one person can know what is right for all angles of their current job responsibilities.
When it comes to Global Currency reserve, we are asking those in decision making positions to make decisions that are PERFECT and have best outcome for USA, and the entire world!
I have never met a person who makes perfect decisions, much less at the complexity level of a multi-trillion dollar global economy.
So back on point, now that I am convinced this currency system is headed for a fundamental change, and even though I see a potential way out that would minimize damage, this of course is NOT the way the world will go. The decision makers will fight tooth and nail to keep the existing fiat system, no matter the collateral damage on everyone. Therefore I expect between now and 2017 the most un-fun economic atmosphere I will ever have the displeasure to experience. :( Doesn't mean life won't be fun, for as things change, it does tend to be gradual, I do not expect a sudden currency crisis of epic proportions.
That can't happen until many other events transpire first, starting with stock market volatility, which I believe is next up. See my next post for why.
What I think may happen is China and Russia want to take over the fiat currency system, and if USA is smart, they will let them! I know that seems insane to say, but once they get the old system under their control, USA will be free to adopt an alternate system, hopefully one based on virtual currencies. In a weird way, the USA may know this system cannot sustain, and best let someone else hold that bag as it terminates. The old system is based on demographics, cheap oil, and dependency of the world to agree USD as a value standard. (I need to make a new post, will update link here)The termination of the fiat currency and rise of virtual currencies as dominate winner may take a decade, but should begin in earnest by 2017.
Showing posts with label Russia. Show all posts
Showing posts with label Russia. Show all posts
Sunday, April 13, 2014
Tuesday, March 4, 2014
Gold, Bitcoin, US Dollar, and the Ruble
Below is a summary of stores of value that is in the news, gold, Bitcoin, USD, and Russia's ruble.
The moral of this story is all storage of wealth is relative.
To the charts!
The moral of this story is all storage of wealth is relative.
To the charts!
Gold Miners
Back on January 26th I posted Gold at a Crossroad. As readers know, I don't buy gold or gold paper, but gold miner stock. Since that date, GDX has risen from about 23 to 26, a little over 10%, at best 15% from low to high in that period. So while 10% is not that big in the scheme of life, its pretty big for a sector beaten to a pulp since 2011. Of course, the magic question is, will it continue.
Bitcoin
Bitcoin ran into major issues when gtmox started to fail a couple of weeks back, with bitcoin spiraling from 820 to about 540 a coin. Bitcoin shaken to the core has held up pretty well, considering it is not even a currency!
I should have my first bitcoin tomorrow, already up 20% in a few days. Reports of bitcoins death is insane, its here to stay. Overstock predicts before years end, $20M in sales through bitcoin.US Dollar
The US dollar is under constant attack from arm-chair economists, I see nothing of concern according to the charts.
Ruble
Well, the Ruble is not having a fun time, there is active intervention just publicly announced to stop (yea, right) to hold the ruble's value.
Who could have seen there may be issues? Well lets look back to my post Global Currencies Showing Strain. Granted, the Ukraine issues have accelerated Ruble problems, but its no shock to me there is an issue here. Lets look at the Ruble value over last 10 years, there is no question the Ruble is under strain vs USD, hitting lows not seen 2008 crisis.
Thursday, February 6, 2014
Global Currencies Showing Strain
We are starting to see the countries run into currency problems. I have written for years how this should start between 2013-2017 culminating probably around 2017. I have been amazed how well the system has been able to hold itself together despite the challenges the global banking system has had.
Greece would have lead the world on this front, but since it is part of the Euro, instead of currency problems they have been rewarded for years on end high unemployment and low wages. With 45% below poverty line, its a powder keg.
Venezuela is having severe issues, with reports of toilet paper shortages, The antics of the government are amazing. Many of the knee jerk reactions of price control and government annexing merchants who refuse to sell goods at a loss is par for the course. What amazes me more is this tactic never works, so it must be good to do yet again.
Argentina is also having currency problems, with yet again many government antics taking place. Argentina has had their currency collapse quite a few times in the last 70 years. You'd think that they would have figured out how to handle it better by now. Government BANNING imports and IRON FIST for merchants who refuse to sell goods at a loss. 50% internet tax, food price fixing, etc. Good luck with that!
Ukraine has imposed a 6 day waiting period for foreign currency purchases with additional capitol controls instituted. When I read this what I see is the super rich in that country will continue to drain their wealth out of the country while the common person remains TRAPPED with their devaluing money. This gives the rich more time to exit with more of their wealth preserved. When such actions are taken, everyone in that country should apply to exchange money since they have no clue what 6 days will look like.
Brazil and Russia are having their interest rates rise for cost of government bonds and they don't like it. The solution? Don't hold bond auctions! While in some aspects this is reasonable, if you don't issue debt over time the debt should become scarce, lowering the premium. But without me doing any research, I am going to take a wild guess those countries did not unilaterally cut spending to match this action. Assuming I am correct, they are going to need to auction off bonds to pay people at some point. Or they can follow USA central bank and simply have their central bank buy their bonds. In any event, I hardly think world opinion for bond games like america can do will go over well for those currencies. Rising rates = potential currency run.
Turkey currency the lira has been devaluing quickly under currency fears. That has in turn lead to yet again, capital flight. Imagine that, those who can move wealth out to safety, do. This has sparked a real estate sale in Turkey. Once these things light, its pretty hard to put out.
Europe Union under the Euro has been and continues to be a challenge. Spain, Portugal, and Italy have very challenged economies. Greece's debt is NOT the worst as a percent of GDP in Europe, I put a nice graph at end of this post to show how the debt monster is starting to turn it's head.
China bank HSBC for a short period was instituting capital controls to restrict money flow. That was quickly overturned once it hit mainstream media to avoid a panic. This is a tell. Why did they do this? Because there are issues that people are trying to 'help' by slowing the flow of money. It doesn't matter they overturned it, there is something not right.
Bottom line people is this is not normal, we are entering the phase I stated in Global Currency Shakedown, Round 4 begins in October that things continue to move along nicely for the next phase of this now 5 1/2 year crisis. I believe gold will fare well early, but I am starting to realize the end game is we all go to crypto currencies like Bitcoin. I have started to open accounts and move money as an experiment into Bitcoin and Litecoin and start familiarizing myself with crypto currencies. I stated back in Jan 2011 in post 'power to the people' that the best thing for the world is to go to crypto currencies. There are now 83 crypto currencies and growing, there will be winners and losers. I can't see how Bitcoin loses in the near term so for the short term one of the safer places. I'll do a post on this in more detail later, I highly recommend you listen to this podcast. Thanks to Mike C for the link!
Greece would have lead the world on this front, but since it is part of the Euro, instead of currency problems they have been rewarded for years on end high unemployment and low wages. With 45% below poverty line, its a powder keg.
Venezuela is having severe issues, with reports of toilet paper shortages, The antics of the government are amazing. Many of the knee jerk reactions of price control and government annexing merchants who refuse to sell goods at a loss is par for the course. What amazes me more is this tactic never works, so it must be good to do yet again.
Argentina is also having currency problems, with yet again many government antics taking place. Argentina has had their currency collapse quite a few times in the last 70 years. You'd think that they would have figured out how to handle it better by now. Government BANNING imports and IRON FIST for merchants who refuse to sell goods at a loss. 50% internet tax, food price fixing, etc. Good luck with that!
Ukraine has imposed a 6 day waiting period for foreign currency purchases with additional capitol controls instituted. When I read this what I see is the super rich in that country will continue to drain their wealth out of the country while the common person remains TRAPPED with their devaluing money. This gives the rich more time to exit with more of their wealth preserved. When such actions are taken, everyone in that country should apply to exchange money since they have no clue what 6 days will look like.
Brazil and Russia are having their interest rates rise for cost of government bonds and they don't like it. The solution? Don't hold bond auctions! While in some aspects this is reasonable, if you don't issue debt over time the debt should become scarce, lowering the premium. But without me doing any research, I am going to take a wild guess those countries did not unilaterally cut spending to match this action. Assuming I am correct, they are going to need to auction off bonds to pay people at some point. Or they can follow USA central bank and simply have their central bank buy their bonds. In any event, I hardly think world opinion for bond games like america can do will go over well for those currencies. Rising rates = potential currency run.
Turkey currency the lira has been devaluing quickly under currency fears. That has in turn lead to yet again, capital flight. Imagine that, those who can move wealth out to safety, do. This has sparked a real estate sale in Turkey. Once these things light, its pretty hard to put out.
Europe Union under the Euro has been and continues to be a challenge. Spain, Portugal, and Italy have very challenged economies. Greece's debt is NOT the worst as a percent of GDP in Europe, I put a nice graph at end of this post to show how the debt monster is starting to turn it's head.
China bank HSBC for a short period was instituting capital controls to restrict money flow. That was quickly overturned once it hit mainstream media to avoid a panic. This is a tell. Why did they do this? Because there are issues that people are trying to 'help' by slowing the flow of money. It doesn't matter they overturned it, there is something not right.
Bottom line people is this is not normal, we are entering the phase I stated in Global Currency Shakedown, Round 4 begins in October that things continue to move along nicely for the next phase of this now 5 1/2 year crisis. I believe gold will fare well early, but I am starting to realize the end game is we all go to crypto currencies like Bitcoin. I have started to open accounts and move money as an experiment into Bitcoin and Litecoin and start familiarizing myself with crypto currencies. I stated back in Jan 2011 in post 'power to the people' that the best thing for the world is to go to crypto currencies. There are now 83 crypto currencies and growing, there will be winners and losers. I can't see how Bitcoin loses in the near term so for the short term one of the safer places. I'll do a post on this in more detail later, I highly recommend you listen to this podcast. Thanks to Mike C for the link!
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