Fiat Monetary System Revealed
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By Peter Costa
For over 3000 years from the formation of banking to the creation of currency there have been 2 systems that have ruled. One of these systems has been beneficial to a small group who has sought to control the money supply while the other has been beneficial to the whole. Civilization has gone back and forth between these 2 systems for centuries and a great deal of time and energy has been spent keeping it beneficial to a small group. After diligent research I have come to see that practically every economic catastrophe happening globally right now can be traced to the current monetary system every developed nation operates from.
The 2 systems we have gone back and forth from for centuries can be broken down into a backed monetary system and a fiat monetary system. All monetary systems that have ever existed have been either one. A backed system is when a monetary exchange is backed by something such as gold or precious metals thus limiting the expansion of the money supply. With a backed system it is difficult for the money supply to expand rapidly because it is based on the reserves that are held. When a system is backed and has limitations to the expansion of money it becomes beneficial to the whole and can create a lot of stability in the economy. When a monetary system is backed it makes it very difficult to manipulate the money supply. A fiat system is exactly the opposite of a backed system this is a monetary exchange that is backed by absolutely nothing. In a fiat system currency is typically issued by a ruling entity such as the government and is backed up or enforced by jail time or fees if not accepted. Normally this exchange is paper money or some other form of portable currency that is hard to replicate or forge. With a fiat system the money supply can be expanded as often as needed because there is absolutely nothing backing it. This type of system is typically manipulated and beneficial to a small group rather than the whole. Throughout history fiat systems have failed and have never worked. Fiat systems have been the catalyst for the rise and fall of many great nations.
The current system most developed nations are on right now including the United States is a fiat system. A majority of the currencies being issued today are backed by absolutely nothing. When you boil it down they are useless pieces of paper that are on a path of no return and will soon be used as nothing but paper to light a fire. The Wymore Republic and Former Soviet Union have been the most recent prey for this type of a system and the whole global economy will soon follow. For a fiat monetary system to properly exist there needs to be a central banking system put into place. A central banking system is setup where you have an entity such as the Federal Reserve commonly known as a central bank, print up the countries money and all banks in the nation are attached to this one reserve. The alarming thing with this setup is that the central bank is never owned by the government it is typically owned by bankers or private investors. This system is beyond faulty and can create a lot of volatility in an economy and cause everything from depressions to recessions. The most detrimental part of this setup is that it promotes fractional reserve banking. Fractional reserve banking is when a bank loans out more money than they have in deposits. As recent as the Clinton administration days banks were encouraged to loan out more money than they had and were given a 1 to 9 ratio. How a 1 to 9 ratio works is for every $1 a bank receives in deposit they are allowed to loan out $9. Ever since banking was formed this has been a standard practice between banks. On a backed system it is harder for banks to indulge in this type of practice because if word got out depositors would take all their funds from the bank causing a bank run. A fiat system with a central banking system put into play protects banks from this threat because it acts as a reserve and has all banks in the nation attached to it. If there were any threat of depositors taking out large sums of money they would simply cover that bank. This in itself is the recipe for economic instability and an eventual currency collapse because it allows banks to artificially inflate the money supply.
Now that you understand how the system works let me explain what this type of system enables. For decades now the United States has been on a fiat monetary system. In this type of a system the name of the game for banks is to get as much money out into the economy in the form of loans as they can. Many companies have understood this and have used it to their advantage. Companies have been lining up at banks to receive loans for their companies. With these loans they create companies, include the citizens of the United States in the workforce and start to become an asset or liability on the banks balance sheet. As the years go on these companies run out of money and keep going back for more loans so that they can pay off the outstanding ones. Due to banks wanting to keep money out in the economy they continue lending these companies money giving them enough to pay back interest on the loans and survive for a little longer. Before you know it these companies get to a level where they are “too big to fail” and if they were to go bankrupt they would take the bank down with them. So companies start spending lavishly and keep going back to the banks when they run out of money. This is why companies like AIG and countless others have been able to continue to exist. They have borrowed so much money from the banks and if they were to go bankrupt they would take the bank with them. This exact same scenario has been replicated with individuals through mortgages. Countless banks in attempt to keep money out in the economy have taken individuals who should not have mortgages and approved them. When the individual can no longer make payments they apply for another loan or restructure their mortgage driving them deeper into debt. As long as the money continues to stay out in the economy the bank is satisfied. The problem with this whole type of practice is that sooner or later it all falls apart because everything has a breaking point. This exact scenario has been the catalyst for our current economic state. All that is unfolding right now was lead by sub prime mortgages faltering where scores of individuals could no longer afford their mortgages and had to walk away. Once this happened the bank’s game of artificially expanding the money supply was up. With so many people defaulting on their mortgages banks were no longer able to loan money freely which leads to more loans defaulting and sooner or later it all unravels into what we are currently experiencing.
The jig is up and banks are being forced to close their doors for business. Now you can start to understand why over 195 banks have failed in the last 2 years and why 26 have already filed for bankruptcy in 2010. In addition there are 500 more banks on the troubled list that will soon face a similar fate. One of the biggest banks in the country is on the list which is Citigroup who have over $1 trillion in assets. Effective April.1st, 2010 Citigroup is going to need 7 days notice for anyone making a withdrawal from a saving, checking or money market account. The scary thing is this is already effective in Texas and they have been warning depositors about this since the start of the 2010. This is only the beginning and many more banks will follow suit as more loans default and depositors want to withdrawal their holdings. The only problem with this whole thing is that it is not the banks that suffer from this practice it is the people. Like these large companies that have become too big to fail many of the banks have become too big to fail. We are now in a situation where if certain banks were to fail our currency would collapse. That is why banks will now start exercising the right to take up to a week to provide you with money from your accounts because the government has no choice but to bail them out in hopes that this will all turn around. So far out of $600 billion plus used to bail out troubled banks $537 billion of it has been handed out in executive bonuses. “The banks have no remorse for the current economic crisis and are going to guarantee hyper inflation in the coming times which will lead to a currency collapse” stated Ronald Fricke president of Regal Assets in response to the current banking crisis. As we print more money to solve these situations it only devalues the dollar guaranteeing inflation. If things continue to escalate we will face hyper inflation which if not handled correctly could render our currency useless. As you are probably starting to understand this economic crisis is so inner woven.
As much as it pains me to say this, at this point it may be better off for the United States if the currency collapsed rather than continue to bail out the banks. This would free us up from the web our banks have spun and allow us to start off anew. There are too many things holding back any kind of economic recovery and as Obama put it when he first stepped into office this thing is much deeper than anyone could possibly imagine. The only system that has ever offered stability and the only time period where the United States deficit was completely paid off is on a backed system. All the way up until 1933 the United States was on a backed system and with manipulation from the certain parties we were transferred over to a fiat monetary system. When this system gives way and a new one is introduced rest assured it will be a backed system. If you look around you will already see this beginning. A currency collapse is inevitable in the United States and for the first time in over 30 years countries have started to buy gold in an attempt to back their currency. China is leading the way and plan to purchase over 6000 metric tons in the next 3-5 years. This alone is going to cause the demand for gold to sky rocket thus making it more and more difficult to acquire. If you have not already started backing your green back with gold now is the time.
Hyper Inflation Is The Recovery Plan
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By Peter Costa
Since 2008 the US economy has been hit with a wrecking ball. It started with sub prime mortgages faltering and has escalated into a credit crisis. From toxic mortgage debt to the banking crisis unfolding, the US economy has been in need of surplus capital. In the last 2 years with the combined private bailouts and stimulus packages we have spent well over $2 trillion trying to keep the economy afloat. As each year passes the need for capital is only compounding. Our deficit is at an all time high and projections for the future seem grim. As new budget plans are purposed for 2010 we can start to gauge where the year will take us and how close we are to hyper inflation.
With only 2 months into the new decade the US government has been working rigorously trying to revive the US economy. A purposed $3.8 trillion budget plan is floating around congress and is grossly inflated from years passed. Behind all the fancy wording and political jargon we all know that the rescue efforts are nothing short of continuing to pump money into the system in hopes of recovery. This plan is similar to an individual applying for more credit cards to cover the current outstanding ones or a Ponzi scheme bringing in more money to pay off old debts. Like the later everything has its breaking point and sooner or later we will hit that point. With unemployment numbers at an all time high this has been the main focus of the new budget plan. If the US government gets their way we could see a $3.8 trillion budget plan passed this year. Why is this alarming? It does not take a mathematician or renowned economist to know that this is going to lead to hyper inflation. You cannot print up $3.8 trillion and avoid devaluation of the dollar it is next to impossible. We have lost confidence with our major lenders such as China and have seen many countries begin to abandon the greenback.
China has lost such confidence in the US dollar that for 5 months now they have stopped purchasing US treasuries. On Tuesday, 16th February, the US Department of the Treasury released Treasury International Capital [TIC] data for December 2009. It revealed that China sold over $34 billion US Treasuries in December 2009. With this recent news China is no longer the largest holder of US debt they have passed the title to Japan. “For over a decade now China has increased their US Treasury holdings by 8 fold, it is extremely alarming that they are now dumping them and paints a picture of where our economy is heading” stated Ronald Fricke president of Regal Assets. A tsunami of Treasury auctions are set to take place this year, amounting to a total $2 trillion to fund this year’s budget deficit. The Fed is likely to monetize a sizable portion of this debt due to the difficulty the Treasury will face off-loading such a large quantity onto the market. This would have been an easy feat in the 90s or the first half of the last decade, but with the debt ceiling now in excess of $14 trillion, the market will soon realize that buying US government debt is not “risk free” with a default likely. If we are not able to unload the required Treasuries on foreign countries, citizens of the United States may be the next target. There is a bill that is currently being passed around congress that is looking to nationalize retirement plans where if approved will make it mandatory for individuals to place a portion of their retirement holdings in US Treasuries. This will be a devastating blow to the individuals that have already incurred massive losses on their retirement plans and could cause major chaos. As lofty of a bill as it may be I am appalled that forcing Treasuries on US citizens would even be an option.
Based on what has been unfolding since 2008 I am not saying that gold and silver are going to do well I am insisting that they are going to do well. Hyper inflation is the next logical step in our recovery plan and for the people pulling the strings I do not feel that they have even taken into account the devastation it will cause. More importantly I am convinced that who ever is pulling the strings does not care about the US or the dollar. The more I research the more I feel that this may be a carefully orchestrated collapse. In any event we need to wake up and turn our useless pieces of paper into honest currency that cannot be manipulated by government. It is time for us to preserve what we have worked so hard for. Social Security? Not likely. IRA and 401Ks? Not all of it. For centuries royalty and the elite have been preserving their wealth in precious metals. It is time to follow suite before you get left with the short end of the stick. No one else is going to get our back, it is literally left up to us to take action.
Banking Crisis Continues Into 2010
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Banking Crisis Continues
By Peter Costa
The banks in recent times have become a black hole sucking away any chance of dollar recovery in the United States. Since 2008 we have seen the banking crisis unfold and snowball into a colossal mess. As 2010 starts to unravel we need to keep an eye on the banking crisis because it will be an indicator of where things are heading financially. Banks are a crucial part of our financial system and if they continue to fail the green back will not be far behind.
From 2008 to 2009 we have seen 195 banks fail leaving over 500 on the troubled list. Regulators closed 140 banks last year, the highest level since 1992 when officials were still cleaning up from the savings and loan crisis. Community banks are facing persistent pressure from deteriorating loans, many tied to commercial real estate projects that have collapsed or are in decline. With only six weeks into 2010 the banking crisis is compounding from the prior year with over 15 bank seizures as of January. The last Friday of January saw 6 banks fail in a single day this is the exact same number of bank failures that happened in the entire month of January for 2009. The banking crisis is only escalating from last year and projections for the future seem grim. In 2008 we saw 1 bank fail in the month of January; in 2009 that number quintupled to 6 and now over 16 banks have failed for January 2010 leading us down a road of no return. With statistics like this hyper inflation is inevitable and could start to rear its ugly head shortly.
FDIC Chairman Sheila Bair has said in the current banking crisis that bank failures will peak in 2010. FDIC expects the insurance fund’s balance will remain negative until 2013 but says it has plenty of access to cash, including the ability to tap a $500 billion line of credit with Treasury. Ronald Fricke president of Regal Assets stated last week that the FDIC is down to less than a billion in their insurance fund promising to insure over $6.3 trillion in assets and will have no choice but to tap into their credit line with the Treasury.
Hyper inflation at this point it is an unavoidable reality. The dollar is only growing weak and the US economy is demanding more and more of it. The banks are the back bone of our financial system and if they start to give out we will all face an undesirable circumstance. With the banking crisis leading the way for financial meltdown the time to move your money into a tangible asset is now. Never in the history of the United States have we been faced with such a crisis and those who do not protect themselves properly will end up getting pennies on the dollar. Gold is an asset that has been used for centuries to protect people from the greed and manipulation of money supplies. With gold prices where they are currently you could not be in a better buying opportunity.
Time To Buy Gold Coins
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By Peter Costa
There could not be a better time to buy gold coins. There has been a slight correction in the price of gold making it an ideal buying opportunity. This is an extremely temporary situation and before we know it gold will be breaking record highs. For years I have been advising individuals to get into gold and thus far my deductions have been correct. Recently I have received a lot of questions regarding gold and many have been asking if it is too late to get into the yellow metal. This is an excellent question and is something I am going to solely address in this article.
We all know the US economy faces major challenges in the coming times and these challenges are only going to escalate as the year unfolds. Hyper inflation seems to be right around the corner and our global neighbors are proving this to be correct. The US is a major player in the global community and anything that happens here will cause a domino effect elsewhere. If you pay close attention to the global community you will start to see a similar trend taking place that leads to nothing less than the rising price of gold coins making this time an unbelievable buying opportunity.
Recently there has been an influx of new buyers in the gold market place. You have been lead to believe that the largest purchasers are institutions and hedge fund managers but this is untrue. The largest purchasers of gold right now are countries. For the first time in decades countries are beginning to buy gold in an attempt to back up their currencies. This alone signifies that it is not too late to get into gold coins and that current prices are nothing short of a buying opportunity.
Last year alone India picked up 200 metric tons of gold from the IMF making it the largest gold purchase from a country in over 30 years. Since India made its purchase central banks around the world have been increasing their gold reserves. You would think with India making such a large purchase that they were the leaders for increasing their gold reserves in 2009 but they were actually second. China was the largest gold recipient in 2009 increasing their reserves by 454 metric tons. Following China and India was Russia increasing their reserves 111.8 metric tons. Additional countries to take note of are listed below:
1. 454 Metric Tons (China)
2. 200 Metric Tons (India)
3. 111.8 Metric Tons (Russia)
4. 16.6 Metric Tons (Phillipines)
5. 10 Metric Tons (Sri Lanka)
6. 5 Metric Tons (Mexico)
7. 2.6 Metric Tons (Belarus)
The gold rush has only begun and China is said to be leading the way. Ji Xiaonan, who chairs the supervisory board for big state-owned companies under the State Council’s state assets commission, was quoted saying “We suggested that China’s gold reserves should reach 6,000 tons in the next 3-5 years and perhaps 10,000 tons in 8-10 years”. In response to the statement by Ji Xiaonan Ronald Fricke president of Regal Assets said “If China increases their gold reserves to 6000 metric tons in the next 3 years this will push gold prices to over $2100 an ounce.” China is already on track for this goal and in 1 year has added close to 500 metric tons of gold to their already plentiful reserve.
As more and more countries pick up gold there will soon be a shortage. In over 5000 years we have only been able to amass about 160,000 metric tons which is enough to fill two olympic sized swimming pools. Keep in mind that we never throw gold away it is either kept or melted down and turned into something else. It is very possible that the gold coins you own may very well have been a piece of jewelry from ancient Egypt or even the Mayans. If you have ever played a game of musical chairs you know the reality of short supply and that somebody is always left out of a chair. A similar game of musical chairs is happening right now and while countries are quietly trying to pick up gold soon enough someone is going to come short and the true ascend for gold will begin. If you are sitting in the green back in hopes of a dollar recovery I am afraid you will be very disappointed with the results. It is time to quietly get out of the green back and into gold coins before you lose the option to do so.
Fiat Money Paving The Way For Hyper Inflation
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By Peter Costa
With a new decade upon us one cannot help but ponder the direction we are heading in as a whole. It seems like we are in a relentless circle of repetition doomed to repeat the same mistakes our previous generations fought to overcome. As we step into this new day and age we need to open our eyes to the reality of things versus the illusions we have been made to believe. When you turn on the television today you are inundated with the constant smoke and mirrors used to shield us from the truth. Allow me to remove the smoke and mirrors from you and share the reality of our economy as we step into this new decade.
Last year we saw many events unfold that have crippled our economy and contributed to the unavoidable reality we will all soon face which is inflation. Inflation has been caused by fiat money and is an underestimated effect that has resulted in the death of many nations which in more recent times includes the Wymore Republic and Former Soviet Union. It is the catalyst for economic uncertainty and if not handled correctly could render a currency useless launching a nation into complete financial meltdown. Here are the top 3 events unfolding in the US that are leading us down the path of hyper inflation:
1. The Banking Crisis
The banking crisis alone is a burdensome situation that could ignite hyper inflation in the coming times. Since 2008 we have had 195 banks file for bankruptcy. In 2009 over 140 banks failed and included the 6th and 10th largest bank failures in the United States history abducting billions in assets and drying up the FDIC insurance fund. FDIC is down to less than $10 billion in assets promising to insure over $6.2 trillion in deposits. How deep does this thing go? Well let’s just say that Neil Borofsky who is heading up TARP said the banking crisis alone could cost us $27.3 trillion to fix. Ronald Fricke president of Regal Assets says this number is more than the cost of all the wars the US has ever fought combined and is the most that has ever been spent on a single effort in American history which amounts to $80,000 for every US citizen. To make matters worse last year Citigroup reported a second quarterly profit of 4.3 billion but the figure included the $6.7 billion after tax profit from its sale of Smith Barney. If you exclude this onetime event the bank lost 3.4 billion. Similarly BofA showed a profit of $2.42 billion but this figure included the $5.3 billion from its sale of shares of China Construction Bank without this BofA would have reported a massive loss. To make matters worse over 515 banks are on the troubled list and could face bankruptcy this year as well as 35 ongoing criminal and civil investigations of suspected account, securities and mortgage fraud is taking place. You would think with this kind of pressure the banks would be walking on egg shells… that is far from the case. In lieu of such a horrendous year the banks decided to hand out over $587 billion in bonuses to their executives. Is this AIG all over again? These bonuses alone could have paid off every state in the US debt including California or saved mortgages for another 2 years. Needless to say the government has applied pressure to the banks in revealing where the money went and have been struggling to receive answers. The banks know that this fiat money is doomed to fail and according to them there is nothing in the constitution that requires them to reveal this information.
2. Rising Unemployment
It is no surprise that unemployment is at the highest it has been in over 26 years. From September to December 2009 over 538,000 jobs were lost taking unemployment to over 10% nationwide. We all know that 10% is the public number and the reality of the situation is more like 17%. With over 1 million Americans on unemployment it will not be long before they start getting cut off. In fact this year alone we could see as many as 200,000 Americans cut off from unemployment because their pay period has come to an end. This event will muscle thousands of unemployed citizens to cash out of their retirement plans thus pulling money out of the stock market forcing another major drop in the markets. To make matters worse a slew of mortgages are about to renew on houses that are already worth half their value. Mix that in with the increasing unemployment numbers and you get a surge of individuals abandoning their properties and mortgages triggering another wave of the mortgage crisis guaranteeing hyper inflation. The current debt the mortgage crisis is sitting at is around $1.75 trillion.
3. Unaccounted For Bailout Money
Since 2008 copious institutions and companies have been lining up to receive government bailout fiat money. We have seen AIG, Chrysler, GM, Ford and major banks come to Uncle Sam in an attempt to keep things afloat. The result has lead to multiple stimulus packages including a $787 billion package followed by a $1 trillion package. Where does that lead us to today? Over 90% of the money being unaccounted for! The government has been scrambling to figure out who has what and has spent close to $25 million in an attempt to receive answers. We all know that the $152.8 billion given to AIG was used to hand out over inflated bonuses to their executive and treat themselves to lavish days out on the town including a day at the St. Regis Hotel and a hunting trip in Europe. With the banks we know over $537 billion has been handed out in executive bonuses and substantial amounts sent oversees to various institutions in an attempt to invest money in foreign entities and recover their losses. It safe to say that over $600 billion has been dedicated to compensating the lousy executives that helped create this problem in the first place. The already $1.8 trillion that has been dedicated to placing scotch tape and band aids on the holes of the economy is only going fend off the inevitable for so long.
To summarize everything, with the banking crisis, rising unemployment and government bailouts alone we are looking at well over $30 trillion just to keep things afloat not even chipping away at our deficit as a whole. This is the catalyst for an unavoidable expansion of the money supply which will result in hyper inflation. It is time to look back at all the civilizations and nations that have tried to use fiat money as a monetary exchange and you will see that it has never worked. Having a useless paper currency backed by absolutely nothing is the primary reason why so many great nations have failed including Rome. In the history of our world not one nation has made fiat currency work and the US will face a similar fate. With gold prices where they are today you could not be in a better time to transfer your wealth into the only honest money the world has ever had.
Fiat Currency Is Doomed To Fail
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By Peter Costa
Gold bears are sitting in their glory as gold takes the much anticipated correction. It amuses me how gold has been such a proven asset for over 5000 years and the second it has a correction people start to abandon ship. I am a gold bug and proud to admit it. I cease to believe the illusionary dollar recovery and have no doubt in my mind that inflation is about to rear its ugly head. The problem with most gold investors is that they see gold as an investment rather than an asset. They look at gold and try to turn profit on its volatility not even considering that it is an asset more than anything. Gold is a precious asset and only those who appreciate and understand this are going to benefit from the preternatural climb it is about to have.
I am from the school of truth rather than fiction. The world goes in cycles and history repeats itself. Fiat monetary systems have never worked in the history of the world. What most established countries are on right now is a completely fiat system where the majority of their currency is backed by absolutely nothing and the limits to creating money are nonexistent. All across the globe you can smell the fresh crisp bills coming off the printing press of each and every country as a result of current economic events most especially in the United States. Hereon is where the problem lies for any kind of economic recovery. We can put as many band aids and scotch tape on the holes of this monetary system but sooner or later it will all fall apart. There is a reason that the first monetary system in the United States was backed by gold and silver and had limits to the production of money. The founding fathers of the United States foresaw the faultiness of a fiat monetary system and in the constitution banned this type of practice.
We can have all the fake economic recovery we want but as long as we remain on a paper currency backed by absolutely nothing we are doomed to continue down the path of no return. With no limitations to the production of our money supply over the last year we have devalued the dollar so aggressively that we are forcing our creditors to make an impossible choice, stay with the dollar and see 50% of the intrinsic value wiped out… or abandon the dollar and risk global economic catastrophe. We can force the citizens of the United States to continue using the debased dollar but we cannot force our global neighbors. We are already seeing a loss of confidence in the greenback from India, Russia, China, Sri Lanka and many other countries who have been fleeing to gold in an attempt to ditch their US dollar reserves. As stated by Ji Xiaonan Chairman of the Supervisory Committee “China should increase the amount of gold it holds in reserves to reduce potential losses from a depreciating dollar. We recommend China increase its gold reserves to 6,000 metric tons within three-to-five years and possibly to 10,000 tons in eight to 10 years.” The US dollar has lost 15% of its value last year alone due to the incessant printing of money and has no end in sight. Ben Bernanke said it best in his 2002 speech, “The US Government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost.” Comments like this paint the reality of things and the truth behind our economic recovery. We may be building consumer confidence in the United States but the global economy is not on the same page. While the magical technology called a printing press is spewing out the greenback we can guarantee gold to continue breaking new record highs. “With China looking to increase its gold reserves to 6000 metric tons in the next 3 years it is safe to say that this purchase alone will guarantee the price of gold to hit $2000.00 an ounce” Ronald Fricke president of Regal Assets stated last week in an interview.
For those who are from the school of truth, now is the perfect time to purchase gold. Prices have had a small correction allowing the true fans of gold to purchase before the holiday season. Gold bugs enjoy this little gift and pick up as much as you can because the yellow metal is about to take off breaking through levels unheard of.
Where Gold Prices Will Be Before Year End
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By Peter Costa
It seems like everyone is jumping on the gold train these days as more currencies continue to debase themselves. The biggest purchaser has been the central banks but more importantly the Reserve Bank of India. Less than a month ago RBI picked up 200 metric tons of gold from the IMF increasing their reserves by 50% and sending gold prices surging. Predictions for the price of gold have been anywhere from $2300.00 an ounce to $8000.00 an ounce in the next 5 years. Only time will tell where the price is going to go in 5 years but I have a good idea where it will be in the short term.
For almost 2 decades now central banks have only been interested in selling gold. Worldwide they are starting to purchase again unable to tolerate the continued debasement of their dollar reserves. Last week Russia announced that it will be shifting reserve ratios in favor of commodities such as gold. Far more distressing than the flight of central banks from the paper dollar are recent reports that certain governments, including Germany, Hong Kong, and members of OPEC, are now removing their gold holdings from the Federal Reserve and the Bank of England. If this continues it could increase the risk of a gold run on the world’s two key central banks.
All signs points to gold continuing its upward trend but what can we expect before the year end? Through my thorough research on the subject I have come to the conclusion that gold could easily hit $1200.00 to $1300.00 an ounce by the end of the year. With the central bank’s increasing interest in gold and the continuing threat of inflation, gold prices are only going to sky rocket into the New Year. The central bank’s new found interest in purchasing the yellow metal is going to guarantee the rising price of gold in the short term. Inflation and continuing debasement of currencies is going to fuel rising gold prices in the long term. When RBI purchased 200 metric tons of gold earlier this month it shot the price of gold up over 7% an ounce. Rumors have started to surface that RBI is negotiating to purchase the remaining 201 metric tons of gold from the IMF. If this sale takes place before the end of the year we will easily see the price of gold hit $1300.00 an ounce. “Not only are central banks buying tremendous amounts of gold but some of the largest hedge fund managers in the nation are hoarding the yellow metal” commented Ronald Fricke president of Regal Assets last week.
For centuries gold has been the asset that has provided lasting preservation for wealth. As we come into the New Year inflation will start to rear its ugly head and could end up throwing this economy into an aberration. The time to protect your wealth against the inevitable is now and taking immediate action could end up being the best decision you ever made.
The Truth Behind The Dollar And The Value of Gold
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By Peter Costa
The price of gold is unparalleled from any other time in the nation’s history and is only expected to continue this upward trend. As much as the gold bears are expecting a price correction with gold I feel the yellow metal is only going to become more and more valuable. A copious amount of investors are treating gold like it is a mutual fund or stock not realizing it is an asset more than anything and is used as a storehouse of value. Globally we are in an anomalous time that surpasses any investment wave or price correction. We are in a time where all of the currencies globally are suffering and if not attended to could collapse. It would take a true historian to understand the present circumstances we are in because history truly repeats itself. I am far from a historian but based on my considerable research of past economic events I have come up with a serious case pertaining to where things are heading.
If we were to look back over 5000 years and see all of the monetary systems and how they operated we would see a similar trend take place. For centuries there have been 2 basic forms of monetary systems. Systems that were backed and had limitations on the production of the money supply and systems that were not backed which were essentially useless pieces of paper or fiat currency endorsed by the ruling class. Many are unaware but one of the numerous reasons the American Revolution took place was to break away from a fiat system. In the 1700’s Britain was on a completely fiat currency and many in that period including the founding fathers of the United States were trying to use gold and silver as a monetary exchange. It is not by chance that the first monetary system put into place within the United States was a bimetallism system. All currency in circulation within the U.S. up to 1933 was backed by gold and silver and at anytime you could trade your $10 bill for a $10 gold piece. With the help of FDR and Richard Nixon the U.S. was officially off of this standard on April.15, 1971. Since turning over to a completely fiat currency the U.S. dollar has lost more than 85% of its buying power and has no signs of recovery. Unfortunately most of the established countries globally are operating on a similar fiat system. Many countries are starting to wake up to the reality of things and are now making an attempt to protect themselves against the inevitable.
Recently India made the largest purchase of gold in over 30 years acquiring 200 metric tonnes of gold in a two week period. Not long after a fairly unknown country by the name of Mauritius purchased 2 metric tonnes of gold adding to the global demand. Last month Russia purchased over 15 tonnes of gold increasing their already plentiful reserves and since 2006 have purchased over 180 metric tonnes of gold. For the last six months Sri Lanka has been increasing their gold reserves and the estimated amount they have acquired is 5 tonnes. The largest advocates of gold these days is none other than China who have publicly announced that since 2003 they have secretly been buying gold and have increased their reserves over 600 tonnes since. In addition last year alone China produced 288 metric tonnes of gold which is equivalent to 12.2% of the global output making them the world’s largest producer of gold. The amount of gold buying that is taking place with countries globally is nothing but a sign that once again we are moving away from fiat currency. When asked during a Reuters interview to comment on India’s recent purchase, Xia Bin, the chief of China’s Financial Department of the Development and Research Centre stated, “India’s okay with it, why shouldn’t we be? What’s the use for so many dollars, whose purchasing power is weakening anyway? With so many foreign reserves in hand, I think China should buy gold, without doubt.” Ronald Fricke president of Regal Assets in response to the central bank’s recent interest in gold stated last week “As the United States dollar continues to plummet more and more countries are heading into gold”.
Central banks globally are purchasing gold at astounding amounts and are racing to back up their monetary systems. This amount of buying is guaranteeing the rise in the price of gold and if purchasing continues it could make gold one of the most difficult assets on the planet to acquire. Gold has out valued any currency ever created by man and as the global economy starts to shift back to gold it could very well become one of scarcest metals.
The IMF Is Driving Up Gold Prices
By · CommentsBy Peter Costa
It does not take a renowned economist or hedge fund manager to see the value of gold these days. For the last 3 months gold has consistently been breaking record highs leaving everyone in awe. As scores of individuals speak about this being a bubble in gold, I tend to differ in opinion.
There are countless events driving up the price of gold but there is one in particular that we should observe with a watchful eye. The selling of the IMF gold reserves has contributed greatly to the recent surge in the price of gold and is only the beginning for the yellow metal. 
On September 18, 2009, the Executive Board of the IMF approved the sale of 403.3 metric tons of gold (12.97 million ounces) which amounts to one-eighth of the Fund’s total holdings. China for the longest time was the likely candidate for the sale and stated that they were willing to buy up the whole amount in one swoop. In a twist that blindsided the global economy, India negotiated to buy half of the amount and over a 2 week period ended up purchasing 200 metric tons. Since this purchase has been announced the price of gold has jumped up nearly 7% in value. Rumors have been swirling around that India purchased the gold at a premium and the amount they paid is still undisclosed. The reason for the recent purchase from India was to diversify its reserves away from the US dollar which has weakened in recent months. “The US dollar in the last five month has lost 6.5% of its value and is only going to become worse” stated Ronald Fricke president of Regal Assets last week in response to the recent IMF purchase. China has already been extremely vocal about the weakening dollar and now with India steering away from the greenback a domino effect could follow. There seems to be solidarity among the central banks that it is better to cut back on currency holdings and diversify into assets like gold. As the US dollar continues to plummet the global currencies will be dragged down with it. Fiat currency has never worked as a monetary exchange and is doomed to fail. As more currencies start to lose their value the fight for gold will only escalade.
If gold has already seen a 7% increase in price with the purchase of 200 metric tons, I sit in anticipation to see what the price of gold will do when the remaining 203 metric tons is sold. Accordingly who is this new purchaser going to be? Is it going to be China or possibly Russia? The surge in gold prices is only going to continue as everyone starts to catch on to the reality of the failing greenback and it could very quickly become one of the hardest metals to get a hold of. Read More→
What Happened To The Banks We Bailed Out?
By · Comments
By Peter Costa
Gold continues to break record highs while the economy shows no sign of recovery. Inflation is around the corner and will be unprecedented from anytime in the nation’s history. Will it be at the levels of the Wymore Republic or former Soviet Union? I sure hope not but I am not staying in the dollar to find out. There has been a lot of speculation about hyper inflation and some very congenial arguments have been made. I am on the hyper inflation train and these days I am feeling it is going to happen sooner than later. How have I come to this conclusion? The banking crisis unfolding in 2009 is all the proof I need and is rapidly becoming a never ending black hole sucking away any hope we have for dollar recovery.
This year alone over 115 banks have declared bankruptcy and there are still over 400 banks on the troubled list which amounts to over 5% of the nation’s banks. We have already seen the 6th and 10th largest bank failures in the United States history take place this year with a combined loss of $33 billion in assets. Last Friday marked the largest one-day government seizure since the financial crisis began closing the door of 9 banks nationwide. Rumors have been swirling around for some time that Citigroup is next and that they are likely to file for Chapter 11 if the Abu Dhabi Investment Authority pulls its $7.5 billion investment. Bank of America posted a $2.2 billion loss from July through September making it the second quarterly loss in the past year. Things are extremely unsettled in the banking world and we could see it escalade into the New Year.
The most alarming data from this unfolding crisis is the current state and solvency of FDIC. In the beginning of 2009 FDIC was down to $52 billion in their insurance fund for failing banks. With over 115 bank failures this year it has nearly dried up the fund leaving less than $10 billion. With less than $10 billion, FDIC is now promising to insure over $6.3 trillion in assets. We all know that the government would never let them fail and that FDIC has the ability to borrow up to $500 billion. The problem is what that will do to the overall buying power of our dollar. The grand total of all government and FED programs aimed at absorbing or supporting bad loans has now reached $23.7 trillion. With 400 banks on the troubled list we could see this number escalade very quickly guaranteeing rapid inflation. “The banking crisis is just the tip of the ice berg and as more countries jump ship from the dollar things are going to start compounding” says Ronald Fricke president of Regal Assets in response to Friday’s bank seizures.
The banking crisis is becoming worse and more countries are jumping ship from the failing dollar. Banks have been operating on a faulty system for decades and the breaking point is near. It is safe to say that the digits in our bank accounts are nothing but digital numbers and there are not enough greenbacks in circulation to back up the number. If you have any dollars that you do not need for a couple years you owe to yourself to start preserving them now and place them in gold . Last year the dollar lost 15% of its total buying power this year the number could very well double. If we continue on this path in less than 5 years the dollar could become worthless.
