The long-term “irreversible” trends I’ve discussed in detail in my upcoming book, $10,000 Gold, continue to develop. Many of the trends, such as debt creation and the movement away from the U.S. dollar, are accelerating and their consequences are appearing globally. Today we will interpret how these developments will likely affect the price of gold over the coming year and beyond.
Perhaps the most prevalent indication that something is amiss with the world’s economy is a sense of malaise that many have been experiencing — a distrust in the financial system and the government. A U.S. Gallup poll, completed at the end of November 2012, found politicians to be the second least trusted individuals in society next to car salespeople. Sharing bottom marks were bankers, journalists, business executives, state governors and insurance salespeople. By contrast, nurses were the most trusted.
This level of distrust is global. Ask any Greek what he or she thinks of bankers and politicians who, through their complex bond deals, have destroyed the country’s economy. Ask the people of Iceland, who ignored the bankers’ demands for more money and instead threw them in jail. Such distrust is a tangible indication that the 41-year-old experiment in a global fiat currency system is failing.
At this stage, it is no surprise to see that those who benefited from this system are stepping up their PR campaign. Their goal is to bolster trust in paper currencies. Such campaigns are broad-based. As James Rickards, author of Currency Wars pointed out, the world is in the midst of an economic war between countries, currencies and gold. Developing countries are challenging the U.S. dollar’s de facto reserve currency status, and many in the East are turning to physical gold. The Western financial media insists on supporting the status quo with their positive messages of imminent economic recovery, but many are not buying it and the global appetite for physical gold is the best indication of this.
It should come as no surprise that the U.S. petrodollar is facing challenges. Reserve currencies go through cycles that last about a century as can be seen from the reserve currency chart. They usually end when the country that has this exalted privilege creates too much currency and goes too deeply into debt, just as the United States is demonstrating.
As in any war, “Truth is the first casualty,” but how do we distill the truth from so much complex and contradictory financial information? The answer is simple: By changing perspective; by using gold as our measure for financial assessment. The gold vantage point is more comprehensive. It allows us to see the hidden influences of inflation, for example. It helps us to understand why governments are doing what they are doing, despite their words to the contrary.