No matter who wins the U.S. presidential election come November 6 ― there is simply no way our country will ever make good on its gargantuan debts and pile of IOUs that now total as much as $212 trillion.
Washington could raise taxes to 100% of your income, and the debt still
wouldn’t be paid off. They could slash spending to zero, and the debt
would not be paid off.
The same applies to Europe. It’s drowning in debt and there is simply
no combination of tax increases and austerity measures that will fix
its problems, either.
So what’s the solution then? It’s actually very simple.
The world needs a new monetary system. New “rules of the game,” as central bankers like to call them.
Or a “new financial architecture” — the term used by many academics. A new “Bretton Woods.”
Thing is, that’s where we’re headed. Toward a new monetary system. But getting there won’t be easy.
Right now, for instance, the world is mostly caught up in competitive
currency devaluations. No country wants a currency that’s too strong
for fear it will hurt exports and aggravate deleveraging and deflation.
So the Fed prints money. Ditto for the European Central Bank. In fact,
almost all major central banks are now printing money. They all think
that money-printing will inflate away debt, cheapen their currency,
revive exports and fix unemployment.
But the fact of the matter is that no amount of money-printing will solve any of those problems.
It’s not going to solve unemployment in the U.S. or in Europe. It’s not
going to get rid of unpayable debts. It’s not going to fix unfunded
pensions, Social Security, Medicare.
It’s not going to rescue Europe’s zombie banks and governments.
And it’s not going to build real wealth for anyone.
At best, all it will do is artificially inflate asset prices.
Meanwhile, the massive debts our country — and Europe — has will
continue to mount. The cost of servicing the rising debt will become
more and more burdensome.
And this will go on until the entire house of cards on both sides of the Atlantic comes crashing down.
We’ve already seen the first phase hit, and pass. We’re now in the
middle of the eye of the storm, where there’s relative calm. But soon,
the next phase, the next wave of the storm will hit.
It will be the worst phase of this great financial crisis. It will tear
apart everything you thought you knew about the world, about your world, about your wealth, your children’s future, your grandchildren’s future.
It’s where gold will soar to well over $5,000 per troy ounce. Silver to
over $150. Oil to near $200. Food prices to the moon. Interest rates
surging. And more.
And then, when the house of cards finally comes crashing down, world
leaders will finally get together to change the world’s monetary system
to wipe out and forgive bad debts and to start anew with a fresh
In the end, when it finally becomes
apparent that no amount of money-printing, tax hikes or austerity
measures will fix the sovereign-debt problems of Europe and the United
States, world leaders will meet and agree to two basic steps for the foundation of a new world monetary system ...
Monetize most, if not all, of the Western world’s debt (temporarily sending gold to well over $5,000 an ounce).
Create a new world reserve currency, tied to a commodity basket and administered by the International Monetary Fund.
I also suspect that at some point, as far-fetched as it may sound,
world leaders will also consider a debt-free banking system. One that
mimics, at least in part, the Islamic banking system where Sharia law
forbids usury and interest and, instead, works on the basis of
“Profit-Loss Sharing,” or PLS. Put another way, the bank becomes your
partner in your home or your business, instead of a lender.
We have a long road ahead of us. But as I said at the outset, I believe
the crisis the world is going through will eventually give birth to a
better world for all of us.
It just won’t be easy getting there. It will be a trip through hell.
Right now, most markets are still consolidating and looking like they
will retest important support levels, as I have been expecting. Gold is
starting to slide; so are silver, oil and many other commodities.
So while downside is still present, and there are opportunities to make
money on the downside, never forget that there is one asset — bar none
— that you should own for the longer term.
It’s gold. There is nothing better than gold. If you own gold already,
hold, and wait for my signals to add more gold. If you don’t own gold,
get ready to buy — either on a decline back to major support levels, or
a full-blown breakout to the upside above $1,823.