The global marketplace is in the midst of a “grand experiment” that has totally unknown consequences. It is no surprise that even more analysts are now realizing it is time to assess the ultimate impact of turning our financial existence over to politicians and central banks.
The Power of Fiat: Create and Destroy
The global experiment of Bretton Woods has been underway for nearly 70 years since the total reliance on paper currency replaced the gold standard, largely at the whim of governments. That currency is based solely on the “faith and credit” of governments worldwide, and those national economies are now inextricably intertwined.
The U.S. prepared for this event with the creation of the Federal Reserve. The result of such interdependence means no one nation’s faith and credit is sufficient to fully support the trillions upon trillions of paper and digital currency that would become worthless under a number of scenarios.
Borrowing Against the Future
We have noticed here how such power to create an unlimited amount of digital and paper currency has seduced the world’s politicians to borrow against the future to reach totally unsustainable levels. Moreover, the great majority of those governments continue to borrow and spend at unsustainable levels. This includes the United States, which has seen its national debt double to a previously unimaginable $20 trillion – and continuing to grow at an ever-alarming rate.
It is important to fully understand the fact that there has never been a time in history where all governments were in this situation and bearing such debt. Additionally, this situation has been created within just the past seven decades – with only a small handful of elites aware of the contingent disaster they have made possible. When the financial butcher’s bill on this global debt is finally paid, the world will experience a financial catastrophe the likes of which it has never seen.
Implicit Destruction on Retirement Portfolios
While none of those elites are acknowledging the financial Frankenstein they have helped create, much of the growing interest in buying precious metals evidence the potential realities. However, these issues aren’t just creating monstrous current and future liabilities; they are impacting individuals worldwide today in numerous areas.
For example, few Americans are aware of the implicit 50 percent tax that has been levied on their savings and portfolios over the past decade.1 In an effort to keep the price of assets (securities and real estate, for example) high, the FOMC has continued to perpetuate historically low interest rates. A precious metals IRA, on the other hand, receives its security from the value of gold and silver.
Drunk with their perceived power to control free markets, the Fed (and central banks around the world) has spent a decade building distortions into the marketplace that can only be remedied with a significant and quite painful correction. Moreover, many classes of assets are addicted to this financial opiate, and unable to even consider the pain of withdrawal. Note the quivers that shake the world’s markets when the Fed suggests even a minor rise in the rates.
Gold Remains a Safe Haven
Regardless, the world has been taught throughout history: You can fool some markets sometimes, but you can’t fool them forever. Unfortunately, in the financial world, the recent one full decade of the seven decades of the experiment seems to be approaching forever.
Wise investors are taught and learn from experience to balance risk with reward. It is a potential tragedy that most investors today do not fully understand the fundamental risk that exists in so many assets. When it comes to truly safe haven investments, the history lesson today includes two key elements: 1) governments can’t control markets for more than finite times, and 2) gold has never failed to protect value and purchasing power in every financial disaster.
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