BRACE FOR IMPACT: Part 4, How Gold and Silver Perform During Currency Resets by Lynette Zang
What I would like everyone to understand is that fiat money is designed to reset via inflation. Bankers and governments know that nominal confusion hides this from the public. Hyperinflation is simply the final wealth transfer blow off.
But to see what’s likely in our future, we can use the past to show us how they make these transitions and get us to go along willingly. It’s important to understand and share this information so the next system may be fairer to all, not just those at the top.
People do not like change, so changes must happen as invisibly as possible at first.
By allowing the new currency to circulate with the old, people become comfortable and give them the same value. Between 1913 and 1933, $1 Silver (almost an ounce), $1 Gold (almost 1/20th ounce), $1 Federal Reserve Notes could all buy the same amount of goods and services. So people were taught to value them all the same.
But they were not and as the fiat experiment kicked off, the fiat dollar lost 53% of its value because of new money printing. As the dollar lost value, incomes rose in terms of dollars to offset this loss and hide the transition.
The 1929 Stock market crash and following depression were used to take gold out of public hands and remove restrictions around government spending. Between 1913 and 1933 the value of the USD had been reset almost 22%, and no one realized what had happened. Additionally, gold was officially reset from $20.67 to $35 for an overnight devaluation. That one was visible.
In 1948 the US agreed to hold the USDs value at $35 to an ounce of gold, but the US funded the Viet Nam war via inflation. Global governments understood this and there was a run on the dollar.
The war was used to justify removing silver from US currency. We were told that we needed silver to make parts for the war, but if there really was a shortage, why allow silver money to remain in system? They did this to make the transition to pure debt-based fiat invisible. They didn’t confiscate, which would have been very visible. Rather, they allowed the new coins to circulate with the old.
In this way, people got used to the new coins and since they were interchangeable with the silver coins, were thought to have the same value.
Between 1933 and 1971, when governments could still convert USDs into gold at $35 an ounce, inflation reset the value of the dollar down over 69%.
After 1971 Governments could no longer convert dollars into gold and was officially reset to 42.22. It remains there today.
NO SILVER AND NO GOLD = NO RESTRICTIONS FOR CENTRAL BANKS
Since 1971 the value of the dollar has been reset almost 84% at an average rate of 1.78% per year. Many central banks target 2% a year and call that “stableâ€. Likely that’s because the average person doesn’t notice that level of inflation, like the frog in the pot of water.
Today, officially the Federal Reserve tells us there is less than 4 cents in purchasing power value in the USD (compared to the 1913 dollar), yet they tell us we need more inflation and are actively seeking it. Just who does this benefit?
The average income never keeps pace with that inflation, but gold does. If you had 1/20th of an ounce of gold in 1971, you could have bought 50 loaves of bread. Today, that same 20th ounce will still buy 50 loaves of bread. This is the secret they do not want you to know. But this also why governments hold gold in their reserves.
Of course, what I just showed you was a controlled inflationary environment. What happens when governments and central banks lose public confidence and therefore control?
Germany is the most well known case but not the worst.
In 1918 it took 1 mark to buy a loaf of bread, but by 1923 it took 200 billion marks to buy a loaf, so the paper mark had NO MARKET VALUE, regardless of all the zeros on it. As things cost more, it’s not showing an increase in value, which is what people think, it really shows the loss of value in fiat money
But with one ounce of silver you could still buy 2 ½ loaves, so it ALWAYS had market value. But because resets are done against gold, 1/20th of an ounce bought 435 loaves.
Venezuela is currently in the throws of a hyperinflationary event. This is an opportunity to see what it will most likely look like globally.
A new report from the IMF indicate big problems in the global economy. But the tool they’ve used in the past, debt, is basically used up. They’ve been telling us we need inflation, but to deal with this next financial crisis, because this debt mountain had grown so large, perhaps only hyperinflation will be able to deal with all this debt.
History clearly shows us that in the end, fiat money keeps the name, but loses all value. But gold and silver hold value because they are used all areas of the economy. Fiat money is only used as a wealth transfer tool.
When hyperinflation rears its inevitable head, what do you want to hold?
Slides and Links:
https://fraser.stlouisfed.org/files/docs/publications/bms/1914-1941/BMS14-41_complete.pdf
https://fred.stlouisfed.org/series/CUUR0000SA0R
https://fred.stlouisfed.org/series/CUUR0000SA0R
https://fred.stlouisfed.org/series/MAMGASQ027S
https://en.wikipedia.org/wiki/Coinage_Act_of_1965
http://www.presidency.ucsb.edu/ws/?pid=27108
https://fred.stlouisfed.org/series/CUUR0000SA0R
https://fred.stlouisfed.org/series/MAMGASQ027S
https://fred.stlouisfed.org/series/CUUR0000SA0R
http://stockcharts.com/freecharts/historical/marketindexes.html#commodities
http://stockcharts.com/freecharts/historical/marketindexes.html#commodities
www.macrotrends.net/1441/gold-to-silver-ratio
https://en.wikipedia.org/w/index.php?curid=1080917
http://foundationsofecon.blogspot.com/2011/09/german-hyperinflation.html
http://209.157.64.200/focus/f-bloggers/2624106/posts
https://www.silverdoctors.com/gold/gold-news/chart-of-the-day-deutsche-mark-silver-during-weimar-hyperinflation/CC BY-SA 3.0
https://en.wikipedia.org/w/index.php?curid=1080917
http://foundationsofecon.blogspot.com/2011/09/german-hyperinflation.html
http://209.157.64.200/focus/f-bloggers/2624106/posts
https://www.silverdoctors.com/gold/gold-news/chart-of-the-day-deutsche-mark-silver-during-weimar-hyperinflation/CC BY-SA 3.0
https://en.wikipedia.org/w/index.php?curid=1080917
http://foundationsofecon.blogspot.com/2011/09/german-hyperinflation.html
http://209.157.64.200/focus/f-bloggers/2624106/posts
http://bruegel.org/2018/02/venezuelas-hyperinflation/
https://www.havanatimes.org/?p=130852
https://tradingeconomics.com/venezuela/food-inflation
https://www.goldbroker.com/charts/gold-price/vef
https://www.goldbroker.com/charts/silver-price/vef#historical-chart
https://www.havanatimes.org/?p=130852
https://tradingeconomics.com/venezuela/food-inflation
We believe that everyone deserves a properly developed strategy for financial safety.
Lynette Zang
Chief Market Analyst, ITM Trading