WHY GOLD MATTERS
For quite some time now I have been watching the global news and developments regarding gold. Being a part of the industry now makes it a higher priority than in the past. What I am about to share is what I consider crucial to understanding the times in which we live and the role that gold plays in it now and into the future and how it will affect our lives.
Where it all began
The first mention of gold is in the second chapter of Genesis where it says in verse 10 “A river went out from Eden to water the garden. From there it divided and became the source of four rivers. 11 The name of the first is Pishon, which flows through the entire land of Havilah, where there is gold.
12 Gold from that land is pure; bdellium and onyx are also there.”
Gold is mentioned from Genesis to Revelation and is used both as physical gold and references to spiritual attributes as well such as our “tried faith is worth more than refined gold.” That verse would imply that in New Testament times, gold was perceived to be the ultimate material measure of worth.
Gold and silver metals which I believe include platinum group metals have from the beginning of time been considered measurements of wealth and a means of trade and exchange.
Coinage dates back to 2,700 B.C. with the Sater, a mixture of gold and silver pictured here:
“The use of gold as proto-money has been traced back to the fourth millennium BC when the Egyptians used gold bars of a set weight as a medium of exchange, as had been done earlier in Mesopotamia with silver bars.”
We know from the bible that Abraham was a very wealthy man.
“Abram was very rich in livestock, silver, and gold.” Genesis 13:2.
One of the most intriguing verses to me is found in Haggai where the Lord is quoted as saying
“The silver and gold belong to Me” — this is the declaration of the Lord of Hosts. “
The fact that the silver and gold according to the Creator belongs to Him creates a unique paradigm for considering the role of precious metals in the world and to gaining an understanding of what in the world is going on, when it comes to gold.
Our World today-
The world is a rapidly changing place. What we have come to know and rely on for stability, predictability, security, and a sense of direction is up for grabs.
I believe the cultures of the world ultimately reflect the inherent belief systems of the various people groups and nations of the world.
As an example, our nation, founded on biblical principles with a fairly clear sense of right and wrong and justice and human life being the greatest value, has over the past two hundred years cut loose of its foundation and is adrift upon popular public opinion that seems to be shifting morally to the extent that in many cases what was previously considered right is now wrong and what was wrong is now right.
In World War II, over fifty million people died in the battle to counter evil and to reestablish liberty.
A noble self-sacrificing cause for those on the right side.
Since 1973 in the United States alone over fifty million babies have been killed in their mother’s wombs.
An ignoble self-centered cause for those only concerned for themselves and their personal convenience.
The purpose of this writing is not to dwell on the atrocities occurring in our society and on a global basis where Christians are the most persecuted people on earth and are experiencing more persecution than in any other period of history, but to demonstrate that the lack of valuing human life on a global scale is a reality that I believe reflects a world in chaos desperate to find stability and personal security at just about any price and looking to blame someone for their lack of it.
Without God, the world has no hope and no security for its future yet it is desperate to find it somehow and someway even at the great cost of human liberty and life.
Historical and Biblical Perspective-
As I began this by introducing the fact that gold has been around since the beginning of time and has been considered a measurement and means of determining wealth, I will now return to that idea in light of the backdrop of the world we now live in and the purpose and function it has had and will have in the world in our lifetime.
Trade of goods and services has always needed a stable means of determining value within a given culture. As I mentioned earlier, the government of Egypt 6,000 years ago established monetary value based on gold as the standard of measurement. By doing this everyone could determine value for the goods and services on an agreed upon basis thus creating a system of economic trade with a sense of stability and predictability. Such a system fosters a level of trust and dependency for financial security with everyone in unity agreeing upon the values.
Weights and measures are part of the Mosaic Law and were considered important even by God himself who warned against false representation. In Proverbs it says “Differing weights and varying measures — both are detestable to the Lord.”
In Deuteronomy 25:15 it says, “You must have a full and honest weight, a full and honest dry measure, so that you may live long in the land the Lord your God is giving you. 16 For everyone who does such things and acts unfairly is detestable to the Lord your God.”
So fairness and equitable standards are important to God. When these are violated He considers this a detestable thing and something that can lead to shortening of life. This is true for individuals as well as nations and how they conduct business.
One of the fundamental principles in the formation of our country and in fact the same principles affect all nations, was in attempting to establish a basis for evaluating our currency. There’s much written on the history of money in our country and I will not detour into that area but recommend looking into it.
One note however referencing gold and silver is found in our Constitution.
“Runaway inflation and the collapse of the Continental currency prompted delegates at the Constitutional Convention in Philadelphia in 1787 to include the gold and silver clause in the United States Constitution, preventing individual States from issuing their own bills of credit. Article One states they were prohibited to “make any Thing but gold and silver Coin a Tender in Payment of Debts.”
The short version is that gold and silver have been the primary standards behind our currency since 1785.
During brief periods, war times especially, the currency was taken off the standards and temporarily became what is known as a “fiat” currency, not backed by anything other than the government and the perceived value of it.
For the purpose of this writing, I am going to reference our recent history and the role that gold has played.
Towards the end of World War II in the summer of 1944, a meeting occurred in Bretton Woods, Massachusetts.
“The Bretton Woods Conference, formally known as the United Nations Monetary and Financial Conference, was the gathering of 730 delegates from all 44 Allied nations at the Mount Washington Hotel, situated in Bretton Woods, New Hampshire, United States, to regulate the international monetary and financial order after the conclusion of World War II.
The conference was held in July 1944. Agreements were executed that later established the International Bank for Reconstruction and Development (IBRD), and the International Monetary Fund (IMF). (This also led to the creation of the World Bank. my added note)
After the Second World War, a system similar to a gold standard and sometimes described as a “gold exchange standard” was established by the Bretton Woods Agreements.
Under this system, many countries fixed their exchange rates relative to the U.S. dollar and central banks could exchange dollar holdings into gold at the official exchange rate of $35 per ounce; this option was not available to firms or individuals.”
All currencies pegged to the dollar thereby had a fixed value in terms of gold.
In 1971, Richard Nixon through an “executive order” took our currency off the gold standard and the dollar became a fiat currency backed by the perceived value of the United States. One of the reasons for this was the fact that there were more dollars in circulation than the gold reserves could support. More money was allowed to be printed than could be backed up by the gold held in reserve by the government.
It’s interesting to note that from that point in the next nine years until 1980 gold rose in value from $35 an ounce to $850 an ounce once gold was allowed to seek its own level of value after having being restricted to an artificially controlled price since 1944.
“Since 1999, the dollar has fallen in value from about 123 mg of gold to less than 21 mg today – a drop of more than 80%. Overall, from 1900 to 2010, the dollar fell from 1500 mg to 25 mg, losing over 98% of its purchasing power.”
This chart shows the value of the dollar in milligrams of gold from 1787 to the present:
The practice of fixing other nation’s currencies to the dollar persists even to this day.
Many commodities especially oil have been traded exclusively in U.S. dollars for the past forty years.
The primary reason the U.S. can continue to print money 24/7, about half a billion each day, is that as the world leading fiat currency many other currencies and commodities are pegged to it and are dependent upon it and goods and services are traded primarily in dollars between nations of the world.
The average cost of printing a note is 10 cents, regardless of the face value; $1, $10, $100. That’s what is amazing about the system. Nothing is given in exchange for these notes but the promise of the United States of America that it’s worth what they say its worth. And by the way, have you noticed it is just a “promissory note” backed by the Federal Reserve Bank to be worth exactly what they say it is worth but exchangeable for nothing tangible, like gold?
Recent estimates show that between one-half and two-thirds of U.S. currency in circulation is held abroad. As long as other nations agree to play along and support the fact that the U.S. dollar is the sole determining factor for determining values and exchange of goods and services, there’s not a problem.
But what would happen if nations decided not to participate any longer and came up with alternatives to the dollar? What would happen to the perceived value of the dollar and more importantly what would happen to the possible two thirds of the U.S. currency in circulation abroad?
Another important historical fact occurred in 1969. This is when the IMF established what is known as SDR’s.
Here is an explanation taken directly from their website:
“The SDR was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system. A country participating in this system needed official reserves—government or central bank holdings of gold and widely accepted foreign currencies—that could be used to purchase the domestic currency in foreign exchange markets, as required to maintain its exchange rate. But the international supply of two key reserve assets—gold and the U.S. dollar—proved inadequate for supporting the expansion of world trade and financial development that was taking place. Therefore, the international community decided to create a new international reserve asset under the auspices of the IMF.
Only a few years after the creation of the SDR, the Bretton Woods system collapsed and the major currencies shifted to a floating exchange rate regime. In addition, the growth in international capital markets facilitated borrowing by creditworthy governments. Both of these developments lessened the need for the SDR. However, more recently, the 2009 SDR allocations totaling SDR 182.6 billion have played a critical role in providing liquidity to the global economic system and supplementing member countries’ official reserves amid the global financial crisis.
Basket of currencies determines the value of the SDR
The value of the SDR was initially defined as equivalent to 0.888671 grams of fine gold—which, at the time, was also equivalent to one U.S. dollar. After the collapse of the Bretton Woods system in 1973, the SDR was redefined as a basket of currencies. Today the SDR basket consists of the euro, Japanese yen, pound sterling, and U.S. dollar. The value of the SDR in terms of the U.S. dollar is determined daily and posted on the IMF’s website. It is calculated as the sum of specific amounts of the four basket currencies valued in U.S. dollars, on the basis of exchange rates quoted at noon each day in the London market.
The basket composition is reviewed every five years by the Executive Board, or earlier if the IMF finds changed circumstances warrant an earlier review, to ensure that it reflects the relative importance of currencies in the world’s trading and financial systems. In the most recent review (in November 2010), the weights of the currencies in the SDR basket were revised based on the value of the exports of goods and services, and the amount of reserves denominated in the respective currencies that were held by other members of the IMF. These changes became effective on January 1, 2011. In October 2011, the IMF Executive Board discussed possible options for broadening the SDR currency basket. Most directors held the view that the current criteria for SDR basket selection remained appropriate.
The next review is currently scheduled to take place by the end of 2015.”
Whether you took time to read all of this or not, please note the highlighted statements and particularly the last one.
This brings us to the present which is where I want to share what I am observing taking place in real time, meaning right now and the importance of what I have shared in terms of the place gold plays currently and will play in the immediate future. As Bob Dylan prophetically sang back in the 1960’s;
“The times they are a changing!”
Present day realities
SDR’s- The significance of the SDR program to provide stability to the world economies has served to primarily keep the U.S. dollar propped up as the primary global fiat currency. SDR’s or the basket of currencies are all measured and evaluated daily in U.S. dollars.
Unfortunately, one of the down sides to this is that now the IMF primarily has moved into the role of every five years determining what all of those currencies are worth. The next evaluation was scheduled to take place before the end of this year as the review is every five years but for some reason has been put off until January 2016
Obama is pressing to have this extended to the end of next year, 2016 after the national elections. Why would he want to do this? Out of concern for the outcome of the evaluation and how that might affect the country in an election year. Why should he be concerned? The IMF looks at the countries represented in the “basket” as to their value based on the country’s GDP, debt load, trade and other economic indicators such as the rate of economic growth and projected growth. Our growth is projected to be at about half of what it has been for the past fifty years for the next ten. This could adversely affect the dollar and its value on a global basis as well as the other currencies which have suffered losses in recent days.( As of two days ago, the IMF did agree to put off the review until September 2016.)
Negative Interest Rates?
Value for currencies are also related to what can be charged in the form of interest without negatively affecting the economies they support. The stronger the perceived value of the currency the higher the interest rate is the typical scenario however since the bottom fell out in 2008 the Federal Reserve Bank has kept their interest rate near or at 0%.
There were recent rumblings that this was about to change and that an increase was on its way. In September of this year that disappeared. Statements from the Fed now indicate it may be before the end of the year however there is some speculation that it might even go the way of the European Banking system that decided to go negative this past year. Interest rates historically have been used to control inflation and deflation within a given economy. The 0% was designed to help stabilize the U.S. economy after the crash of 2008. Only the Fed knows for sure what they will do next.
The Central Bank of Europe is now charging interest to the banks in their system for the Euros they hold in their banks. This is seen as a desperate effort to force banks to put their Euros into circulation in an attempt to prop up a troubled economy. Some of the banks, including the Swiss banks are passing the charge to their large depositors and charging interest for keeping money in their banks.
The Euro like the Dollar is a Fiat currency backed by the perceived value of the European Union.
Both currencies along with Japan’s Yen and the U.K’s pound are up for reevaluation by the IMF which could affect the value and strength of the dollar on a global basis because SDR’s are quoted in U.S. dollar values.
A New World Currency?
Perhaps one of the most significant events taking place is the establishment of an alternate currency system to the dollar based IMF system known as the BRICS Development Banking System.
BRICS is made up of currencies from Brazil, Russia, India, China and South Africa. Here’s a recent statement regarding this emerging currency system:
“The New Development Bank (NDB), formerly referred to as the BRICS Development Bank, is a multilateral development bank operated by the BRICS states (Brazil, Russia, India, China and South Africa) as an alternative to the existing American and European-dominated World Bank and International Monetary Fund. The goal of the bank is to “mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries”.
The bank is headquartered in Shanghai, China. Each participant country holds an equal number of shares and equal voting rights, and none of the countries will have veto power.”
Though this sounds good and rather “humanitarian” the purpose of the NDB is to establish an new means of trade bypassing the U.S. dollar as the primary means of exchange.
Peter Koenig is an economist and geopolitical analyst. He is also a former World Bank staff member.
Here’s a recent quote:
“In other words, a large junk of hydrocarbons will as of immediately no longer be traded in US (petro) dollars, but in rubles and yuan’s and their partners respective local currencies. This will reduce worldwide demand for the petro dollar. The US is able to maintain pressure on other currencies, currently the ruble, only as long as the petro dollar remains the major world reserve currency. This is the main reason why Washington gets away with a seven-fold indebted dollar (i.e. total outstanding and uncovered commitments are currently more than 7 times higher than the US GDP (US$ 17.6 trillion, 2014 est. – vs. US$ 128 trillion of unmet obligations); making the US worldwide the most indebted country – by far. Once the demand for the (petro) dollar fades – as hydrocarbons are no longer dealt in dollars – the value of the dollar will decline and at worst may result in hyperinflation in the dollar economies, including those closely linked to the US economy.”
Wars for dominance have been fought from the beginning of time. In these days the wars being waged are politically driven by currencies. Since 1944 the U.S. Dollar has dominated world currencies as the major world reserve currency. This appears to be in the process of shifting and the repercussions could have major impact to not only the U.S. economy but also for all those closely linked to the US economy.
So what does this have to do with gold?
Good question. To answer this question let me share some pertinent information regarding what has been transpiring over the past several years with gold.
There has been an alignment behind the scenes of major purchases of gold from guess who?
Russia, China, and India. The primary large scale purchasing has been done by China and Russia but there are other interesting alignments taking place as well.
This article came across this week announcing a new policy regarding gold in India:
“India to roll out gold monetization plan”
Andrew Topf | October 25, 2015
India has a plan to pull more gold into its banks, and the general public is set to play a pivotal role in the program.
On Sunday Indian Prime Minister Narendra Modi said the scheme to “monetize” the precious metal could be ready in weeks. Under the plan, people who own physical gold will be allowed to put their metal into banks and earn interest until it is withdrawn. The idea is to mobilize the thousands of tonnes of gold estimated to be sitting idle in Indian households. “Please, don’t let your gold be dead money,” Reuters quotes Modi as saying. “Gold is very important for the country. Gold can become an economic strength for us.”
India is the world’s top consumer of bullion, with many Indians placing high value on the precious metal as jewelry, often given as a gift, and as a store of value.
The country consumes close to 1,000 tonnes a year, with most of the gold imported; the gold monetization plan is a way to keep the metal in the country and avoid a situation that occurred in 2013, when high gold imports pushed India into a record current account deficit of $190 billion.
In May the Economic Times reported that the Indian public hold 20,000 tonnes of the yellow metal in jewelry, coins and gold bars.
Gold has been pouring into India since the government a year ago scrapped gold import restrictions, including the 80:20 rule, which required gold traders to export 20 percent of the gold that they imported.”
The question is why is India making this unprecedented move to monetize gold and even pay interest to depositors? The reason is to increase the gold reserves of their national banking system and in affect strengthen their currency with the backing of gold reserves.
What about China?
Here are some comments on the trends in China:
This article is from 2013 showing a trend that has taken place over the past couple of years:
China and the Yuan RMB-
“Up until recently, the yuan was only directly convertible into dollars and yen. But now that is rapidly changing. So far this year, the Chinese government has entered into currency convertibility agreements with Australia and New Zealand.
So instead of having to change yuan into U.S. dollars to trade with Australia and New Zealand, now China can cut U.S. dollars completely out of the process.
But right now there is nothing that really gives the Chinese yuan a significant competitive edge over the U.S. dollar. If Chinese authorities truly want the yuan to end up replacing the U.S. dollar as the primary reserve currency of the planet, they need to do something that will make the rest of the world want to use it.
And they could do that by backing the yuan with gold. In fact, there are persistent rumors that China has been busily preparing for that.
For example, the Economic Policy Journal recently pointed out that Dr. Pippa Malmgren, the President and founder of Principalis Asset Management who once worked in the White House as an adviser to President Bush, is claiming that China has plans to turn the yuan into “a hard, gold-backed currency” that will have a distinct competitive edge over the rapidly depreciating paper currencies that the rest of the globe is currently using…The most interesting piece of the puzzle is that the Chinese have emerged as the biggest buyers of gold, mainly off-market. They want the yuan to emerge as a hard, gold-backed currency in a world where everyone else has chosen to inflate and devalue.
The recent bilateral currency deals with Australia, France, Russia and Singapore, and many others, reflect this desire to displace the USD as the world’s reserve currency.
Countries have been battling each other in order to cheapen their currencies. The problem with a cheaper currency is that commodities cost more. So China has decided to opt for a higher currency.
The move in the yuan overnight was one of the most significant upticks I have seen. Like I said, the yuan moved to an all-time high. The yuan has advanced roughly 5% against the US dollar in just nine months. China also imported over 200 tons of gold for the most recent month. That is an extraordinary number. At that rate that’s over 2,400 tons of gold per year on an annualized basis.
This simply speeds up the point at which China will be the largest gold holder in the world.
China saw gold come down and they didn’t just buy on the dip, instead they bought as much as the market would give them. And, again, you see the yuan going up so that is making the price of gold even cheaper for the Chinese. It’s only a matter of time before the Chinese back the yuan with gold. This will push the yuan front and center as a key element in terms of being part of the world’s reserve currency basket. China gets the message. They are doing whatever it takes to establish their dominance in the world, particularly in the commodity arena. Their currency is flying and they are importing as much gold as they possibly can. And without a doubt, China has been hoarding massive amounts of gold. Everyone agrees on that. But what nobody knows is exactly how much gold China currently has stockpiled, because China is not telling anybody.
One recent estimate put China’s gold reserves at more than 7,000 tons of gold, but it could potentially be far higher than that. When China does finally tell the rest of us how much gold they have, they will probably be just a move or two away from checkmate.
What we do know is that China is importing absolutely enormous amounts of gold right now even though China is also the number one gold producer on the planet.
According to Reuters, more than 223 tons of gold was imported into China from Hong Kong in March. That smashed the previous record of 114 tons in December.
Overall, Chinese imports of gold from Hong Kong tripled in 2012, and the final number for 2013 is going to absolutely smash what we saw in 2012. (three years ago)
Obviously something is happening.
China is massively hoarding gold at the same time that it is trying to substantially raise the international influence of the yuan.
It doesn’t take a genius to see where all of this is headed.
If China does decide to back the yuan with gold and no longer use the U.S. dollar in international trade, it will have devastating effects on the U.S. economy. Demand for the U.S. dollar and U.S. debt would drop like a rock, and prices on the things that we buy every day would soar. At that point you could forget about cheap gasoline or cheap Chinese imports. Our entire way of life depends on the U.S. dollar being the primary reserve currency of the world and being able to import things very inexpensively. If the rest of the world (led by China) starts to reject the U.S. dollar, it would result in a massive tsunami of currency coming back to our shores and a very painful adjustment in our standard of living. Today, most U.S. currency is actually used outside of the United States. If someday that changes and we are no longer able to export our inflation that is going to mean big trouble for us.
So keep an eye on China, and look out for any news about the yuan. It won’t happen next week or next month, but eventually we could see China back the yuan with gold. When that happens, it is going to be a complete and utter financial disaster for the United States.”
Since this article was written, the Chinese Yuan has risen from near the bottom of the list of global currencies to the number four currency bumping Japan out of that position.
Ken Ford, president of Warwick Valley Financial Advisors, said China has been pressing to be included in the International Monetary Fund’s Special Drawing Rights, or SDR, currency basket. “So they want to show that they have accumulated enough, but do not want to show their whole hand because it may spook the markets,” he said.
China has undertaken economic reforms aimed at persuading the IMF to include the yuan in the basket, which would accelerate its acceptance as a reserve currency. Read: China’s yuan has ‘Long March’ to reserve-currency status
Or, China could be “lowballing” their reserves to maintain confidence in its substantial U.S. dollar holdings, according to Mark O’Byrne, research director at GoldCore in Dublin.
But lifting the yuan’s potential as a global reserve currency is what’s behind China’s move to lift the shroud of mystery surrounding its hoard of gold.
“China has ambitions to create a global reserve currency to challenge the hegemony of the U.S. dollar and fill the void created by the declining holdings by central banks of the euro. ” Norman said.
And the Chinese “clearly recognize gold’s role in providing credibility and status to what would be a new currency on the international stage,” he said.
The IMF will be considering the inclusion of the yuan “under the special drawing rights in October (now pushed to September 2016 my note) evidently the PBOC has more legwork to do if they want to be taken seriously,” he said. That could mean China will be adding a lot more gold to its reserves in the months to come.” (Two days ago the IMF indicated that China’s Yuan will be voted on to be added to the basket of currencies in September 2016)
So China wants in on the SDR basket to boost the credibility of their currency and at the same time is home of The New Development Bank now on line to compete with and bypass the dollar as the world fiat currency.
It is clear that their long and short term objective is to become the dominant currency of the world. In order to accomplish this objective they will need to divest themselves of U.S. dollars which they are doing even to the extent of recently purchasing gold with a record sale of U.S. treasuries.
Because they hold large amounts of dollars it will take time for the process to transpire without causing problems that could occur from dumping the dollars too fast. And as many have speculated their objective could be to build their gold reserves to the level that could support their currency as a form of the gold standard.
No one knows for sure, except the Chinese how much gold they actually have on hand. The fact that they have become the largest purchaser indicates the direction they are headed; to the gold standard or where gold plays a major role in the value of the Yuan.
And what about Russia?
Putin is the other driving force behind the New Development Bank (BRICS). Surprisingly, the Russian Ruble is already backed by gold. In fact the Russian debt is only 15% of their annual GDP compared to nearly 100% for Europe and 102.98 percent in 2014 for the U.S.
Russia is now in position to bypass selling oil in petro dollars. Many speculate that the sudden drop in oil prices last year was a manipulated attempt to retaliate against and damage Russia. But it backfired.
Here’s a recent comment by Peter Koenig:
“More than a year ago, Russia started selling her hydrocarbons in rubles and local currencies of her trading partners, like China and other BRICS countries. Today Russia is selling her hydrocarbon in gold – yes, in physical gold. The west did not count with the quick analytical thinking of Mr. Putin’s. He will accept artificially inflated dollars and then immediately exchange them for gold, thereby increasing Russia’s gold reserves dramatically. Already today, the ruble is backed by gold – a reality the west with its casino currencies is quiet about.”…” In the meantime and as Russia’s gold reserves increase, Russia has established an alternative SWIFT system. (Society for Worldwide Interbank Financial Telecommunication- bank messaging service used globally)
It is currently being tested internally but could go global within a few months – so that any country wanting to avoid the corrupt dollar casino scheme could use the new system for international monetary exchanges. That combined with ever more countries willing and daring to trade their hydrocarbons in their own currencies or currencies other than the dollar, will further lower demand on the petro-dollar. In addition, under their economic alliance, Russia and China may soon launch a new currency, a basket of currencies that could be joined by other nations ready and willing to abandon the fraudulent western fiat scheme. Immediate candidates would be the other BRICS and the countries of the SCO.(The New Development Bank)
The system could function in the same way as did the Euro at the beginning – as a basket of currencies each valued according to some key indicators of its national economy. – Initially the new monetary system might be gold based – as opposed to the current fiat money with no backing whatsoever. (So the writer thinks that the new currency may be backed to some degree by gold but not necessarily entirely. My note)
Such a new monetary system may soon cover 25% to one third of the world economy, thereby becoming fully autonomous. The petro-dollar would further lose its stature as world reserve. Ten years ago 90% of world reserves consisted of dollar-nominated securities. Today that ratio has shrunk to a mere 60%, as currencies like the Yuan is rapidly gaining ground as reserve money, especially in Asia. Even Australia has recently declared it will increase its Yuan holding.
The drop of the dollar as the world’s major reserve currency is Washington’s biggest nightmare, and has been for the last 15-20 years, when first Iran and then Iraq (Iraq’s oil for food program) and Venezuela threatened to sell their hydrocarbon in Euros. At that time this economically strategic move was not so much meant as an affront to the US, but rather a measure of security for their own economies, as worldwide trust in the US dollar was waning then and now.”
So what’s the point?
I’m an eternal optimist when it comes to life. I repel “doom and gloomer’s” and want no part in there “end times” fear mongering. In fact, I believe the best days are still ahead of us and that those days can be the best of times and the worst of times simultaneously, depending on how we are prepared to handle change.
Living by faith is a way of life that I have had 45 years to practice. More so I would say in the past seventeen years since I took the plunge into full time entrepreneurship. It has been quite a ride emotionally, spiritually and financially.
The one thing I have learned is that the journey is rarely in a straight line. In fact my experience has been more like “a long and winding road”, to borrow a line from Paul McCartney.
What sustains me on this life journey is one thing; knowing the Lord Jesus is with me and for me.
He sees the end from the beginning and is not bound by time or circumstance and is never caught by surprise with any turn of events. In fact, I believe he personally orchestrates and reveals His plan as we go along with our eyes fixed on Him. I also believe that He only has good in mind and planned for us no matter what things may look like.
The fact is, I am more excited about the future now than at any other time in my life. I believe He has pulled the curtain back to show me some of the behind the scenes of what is unfolding in the world and how to prepare for it and prosper in it so that I can be positioned to fulfill His purpose and plan for His Kingdom in the earth.
It is for this reason that I have taken time to put this information together in order to share a way through all that is happening and how to rise above and excel in what He may call you to do.
So where are we today?
If you were to go into your local bank today and were allowed to see the vault and all the cash on hand in the bank, you might be surprised at what you would find there. I would venture to guess that if you could find $20,000 in cash on any given day it would surprise me. Banks only hold cash to cash checks.
So where is the rest of the money? It’s in the internet world of cyber space. But wait a minute. You put your check in and expected to see cash in your account. Well it’s there but it’s not there. And if you should be so bold as to request your cash you may find that you are limited to how much you can withdraw at one time. For amounts over $10,000 you may be asked to wait 7 to 14 days and a SAR (Suspicious Activity Report) will be filed on your withdrawal. The bank is required to report any withdrawals of $5,000 or more to the IRS and to file a SAR on withdrawals of $10,000 or more.
We have moved into the realm of a cashless system with only a remnant of paper money. Not to try to go too deep into the banking system and how it works, which quite frankly I don’t understand and doubt anyone really does, we live “by faith” that the system will work as it always has and when we need cash there’s always the ATM on the corner to reassure us that our cash is available 24/7. It gives us a sense of security and confidence that our faith is well placed and we really don’t want to think about it too much.
In the meantime the world is rapidly changing and what we have put our faith in may not be as reliable as we would like to believe. I know they’re doing the best that they can because after all they have our best interest at heart, right?
Let’s say for sake of argument that the U.S. dollar is in fact artificially inflated and on a dangerous path of just printing more $100 notes for about 10 cents to pay the debts of the U.S. government.
How long do you think other countries are going to want to keep accepting them when there are alternatives that are actually worth more than the paper they’re printed on, say backed by gold?
Fortunately, the U.S. is the world’s largest holder of gold reserves. In fact we hold 8,133 metric tons of gold. Well let’s see how much that’s worth. Say gold is selling today for $1,100 an ounce. Sixteen ounces in a pound and 2,204 pounds per metric ton. Let me work on that a minute. Ok, that comes out to $315,568,207,680. Wow that’s over $315 billion!
So how many dollars do we need to cover to make that work out. Let’s see. There are $1.39 trillion dollars in circulation. So there’s 1,000 billion in 1 trillion. So, 1.39 trillion is 1,390 billion. So the amount of gold based on current values will cover 22% of the dollars in circulation. Well, that doesn’t really matter because we are not on the gold standard and we are still the international fiat currency right?
So what would need to happen to bring everything into alignment if gold became the standard again for the U.S dollar? Gold would have to go up in value to $4,932 per ounce and the U.S. treasury would have to stop printing extra money and be limited to only printing money to replace old worn out money which is what they were supposed to be doing all along.
But there’s a couple of other problems.
With $1.39 trillion actual dollars in circulation in the entire world and 2/3rds are overseas what about all
the “money” held in banks in the U.S.? Well, 1/3rd of $1.39 trillion is $472 billion. So how can there be as of 10 /28/2015 according to the FED $8.15 trillion in deposits in U.S. banks?
Sounds like “funny money” to me but I don’t hear anyone laughing.
The second problem is called the national debt which we read earlier is not just the $17 trillion we hear about but also has to do with the $128 trillion unmet obligations, whatever those are. So with only $1.39 trillion in circulation how do the debts ever get paid? Print more money I guess so we can at least try to cover the interest payments, right?
Some would say that a “correction” will need to take place to sort of, start over sort of like a Jubilee when in Israel all debts were wiped out in a single day once every fifty years so everyone could have a fresh start. But how does the most indebted nation in history pull that off when the creditors are other nations of the world like China and Japan and others who really want to get paid? Not to mention that our Social Security system and other government programs hold most of the paper debt in U.S. treasuries. I’ll leave that for the economic pundits to figure out.
All I know is that if the U.S. was a person, he would have been declared bankrupt a long time ago and found guilty of printing counterfeit money to pay his debts.
So what does all this mean?
Frankly, I don’t know. I think that there are multiple outcomes that appear to be developing simultaneously and can only be speculated on as to the final result.
Here’s what I think could possibly be happening but you will need to draw your own conclusions.
- I think it is a given that the status quo that we have all grown accustom to is changing. Some may be fearing that it will be for the worse especially for the U.S. However, being the eternal optimist that I am, always seeing the glass half full, I think the changes will ultimately be for the better though we may go through a painful time of transition just as in giving birth to something new, I think the ultimate outcome could be a good one.
- China will emerge as “a” if not “THE” primary dominant world economic leader– With all that is going on publically and view-ably, I suspect that it is the tip of the iceberg for what lies beneath the surface. I think there is a long range plan that has been in motion for quite some time to position China to become a dominant financial factor on a global basis. I have shared several of the key elements of these factors in this writing and would recap them by pointing to five major considerations;.
- China has become one of the largest purchasers as well as being the largest producer of gold in the world giving rise to the possibility that the Yuan could be headed towards the gold standard or at least a significant support to the value of their currency.
- China has positioned itself as a key player with the New Development Bank in Shanghai which was strategically placed there to prevent any outside interference from the U.S., the World Bank, or the IMF. Other locations were considered more vulnerable to “attack” or interference. It establishes China as the “headquarters” for the NDB.
- China has petitioned the IMF for entry into the SDR program with a good possibility of being added which would give them the unique position of working both sides of the street so to speak in influencing global currency. This is only possible due to the rocket like advancement of the Yuan as a currency in recent years, surpassing Japan’s Yen which is a SDR currency. It makes it hard for the IMF to say no. As the IMF originated in the U.S. as a means for effecting world currencies and the fact that like so many other currencies, the Chinese Yuan has been pegged to the U.S. dollar, this could lead to unilateral cooperation between the U.S. and China with the potential of removing the political barriers and establishing an economic partnership on a more official basis much like the relationships with our allied members already participating in the SDR basket of currencies. In other words they could become an official ally and partner to the U.S. based on inclusion in the IMF basket of currencies.
- China holds more U.S. debt than any other nation just ahead of Japan at $1.226 trillion dollars. “China has in the past bought Treasuries as a way to keep its currency, the yuan, pegged to the U.S. dollar. That helped lower the value of the yuan and made China’s exports more competitive in foreign markets. In recent years, partly due to U.S. pressure and partly as an effort to curb its own inflation, China has allowed the yuan to rise in value.” This is intentional on the part of China to have leverage over the U.S. “The borrower is always subservient to the lender.”
- China has the fastest growing number of people becoming Christians of any nation in the world. Estimates are approximately 25,000 new believers are added daily. Estimates are that there are 70 million Christians compared to 87 million communist. No one knows for sure because the fastest growing groups are in underground churches. Though Christians are still severely persecuted in China and pastors imprisoned and abused, the spreading of Christianity in China is a force to be reckoned with that has potential to literally transform the nation. I believe that the prayers of these brothers and sisters in China for their nation along with our prayers can bring about a radical change in the future of China and its government.
- I think that the future of the U.S. dollar and its dominant fiat currency in the world status will diminish or at least get adjusted in the near future. With the advent of nations having alternatives to the petro dollar system those 2/3rds of all printed money will begin to come home to roost. This will diminish their value and buying power and the power they have held over other nations. This will have a global impact on all the currencies that have been pegged to the dollar as well resulting in the need for a solution with another form of currency perhaps backed by gold and other tangible commodities. It may open the door for some kind of global currency that combines all into one and backed by gold and maybe some other commodities.
I don’t know. I know that sounds like “Antichrist- end times – one world government stuff”, which I am not a fan of but something will have to change drastically.
The U.S. can’t just keep the printing presses running and neither can the European Union. We are already at 0% interest rates so you can’t go much lower than 0. Well, apparently you can. You can go negative. Which is already happening in Europe.
By the way, while I was still working on this today I saw this headline from The Wall Street Journal, “Big Banks to America’s Firms: We Don’t Want Your Cash (Updated Oct. 18, 2015 8:50 p.m. ET)
“Profit-crunching low interest rates have banks judging cash too costly to keep.
U.S. banks are going to new lengths to ward off a surprising threat to their financial health: big cash deposits. State Street Corp., the Boston bank that manages assets for institutional investors, for the first time has begun charging some customers for large dollar deposits, people familiar with the matter said. J.P. Morgan Chase & Co…”
At some point the bubble will have to burst and the real value will have to be determined. It may result in a new U.S. currency in place of the old “green backs” issued as a result of the adjustment and perhaps it may be backed by something solid like gold once again.
Again, I don’t know and will leave it with you to consider the potential outcome. “Business as usual” I don’t think will be an option for much longer. Here’s a link to an interesting article that just came that shows others are thinking this way. : Overstock.com hoards gold and food
- Russia will grow in power and influence globally- I think this is a given especially in light of what I’ve shared economically. I am not going to address political ideology or Putin other than to state the obvious. He is considered the strongest, most powerful and potentially dangerous government leader on the planet.
We need a strong leader to emerge in the next election that can match and counter his prowess. Keep that in mind as you pray for our country and especially for that new leader to emerge.
I think Russia will play a more strategic role in the EU nations as they look for other sources for stability and resources. Oil and gas particularly and their dependence on Russia for these commodities.
It would be great if our laws changed so we could ship oil to Europe. Unfortunately this is considered illegal at this time. This needs to change. Natural Gas on the other hand is now being processed to be shipped globally. This could help our economy and compete with Russia who has a strong hold over Europe for natural gas. This is a good change taking place.
- The European Union will remain in a state of turmoil and will be vulnerable to outside influences from stronger nations. There is a symbiotic relationship that dates back to World War II with Europe depending primarily on the U.S. to help rebuild the continent. This relationship has continued and is one of the main reasons the U.S. dollar remains in appearance strong and dominant in the world in spite of the inherent weakness within the system.
When the EU was established and the euro became the currency it was a bold and independent move to separate from that relationship. Unfortunately the interdependent socialist based nations have put a severe drain on the stronger nations and put them in a dependent position; Greece and Spain particularly that is causing damage to the Union. It could result in Germany and France opting out which would signal the demise of the Union.
Germany could emerge as the dominant nation in Europe with its lender and owner status over the weaker partners. They also have the lowest debt ratio to their GDP at 75% which gives them an edge over the other EU nations with heavier debt.
So what’s the alternative?
What if there was a way to exchange our dollars for something solid like gold or silver for instance and still be able to use a card to buy gas and groceries and whatever else we want to buy? Only instead of using electronic transfers of invisible cash we were able to actually buy physical gold and then when we needed something exchange it for what we need by using a prepaid credit card backed by our own gold? So when we buy groceries, we simply automatically sell that much gold to pay for the groceries and do all of this without having to use the banking system with the invisible money? Sound too good to be true?
Well welcome to the age where Gold and Silver are money once again.
There are several new systems in place that make it possible to bypass the banking system and turn invisible money into “sound money”. (Sound money is based on something real and tangible like gold. Wednesday night during the republican debate, Ted Cruz made a reference to auditing the Fed and returning to “Sound Money” which drew applause from the audience.)
Bitgold is a Canadian company fully accredited to do what I just described. You can go to their website, use your credit or debit card or even draft from your checking account any amount you desire to exchange your invisible money for solid, real, gold bullion.
In fact you can tell them where you want your physical gold to be stored in secured vaults in Canada, New York, London, Singapore, Zurich and other locations. The gold is actually there and if you want they’ll send it to you or hold it for you. It’s up to you. And in doing so, you have bypassed the world’s banking system and entered the world of a new world currency using “sound money”; gold bullion. Bitgold.com.
Here in the states, I just learned about The United Precious Metals Association with a similar program. Here’s part of a recent article:
“The Gold and Silver are Money Again. Finally. Thanks to this Group.”
By RogueBeekeeper on Sat, 09/19/2015 – 17:26
“As of today you really can pay your taxes, your credit cards, your mortgage, shop at Costco, and buy your groceries without so much as a bank account while using “sound money”.
The United Precious Metals Association in Utah has gold and now separate silver accounts that act as checking accounts do at any bank or credit union.
The way it works is that members deposit Federal Reserve Notes (FRN or paper dollars) into their UPMA account which in turn translates them into golden dollars (or silver). The golden dollars are based off the $50 one ounce gold coins produced by the Treasury of The United States. They are legal tender under the law and are protected as such. So if I were to deposit $1,200 FRNs then I would have $50 golden dollars.
UPMA is the only institution in the country that I know of that doesn’t have a buy/sell spread on their Golden Eagles or Silver Eagles. This means that all my $1,200 FRNs once converted to gold could be spent the next day without losing anything to any sort of premium. The price of a Gold Eagle is 5.8% above spot but when you ‘cash out’ you do so at 5.8% above gold spot. This effectively removes that barrier from sound money.
This year the UPMA released a gold backed debit card via American Express. The way it works is that a member may spend up to half of their gold or silver dollars in any given month period using the card. When I interviewed the founder of UPMA today, Larry Hilton, I learned that the way the card works is that they have made a contract with American Express so that UPMA members can use what are technically credit cards as a debit card anywhere American Express is accepted. The members are added on as ’employees’. Right now there are already hundreds of people around the country using this method of payment. They are literally spending gold on groceries without losing anything to premiums or in transaction fees to UPMA. In fact they get 1% cash back in gold.
This service is available to anyone in the United States and requires no credit check whatsoever. Using the bill-pay service online one can pay for what American Express can’t such as credit card bills, property taxes, or your mortgage.
The golden dollars are simply converted right back into FRNs and paid out. When asked Mr. Hilton affirmed that there are many people that don’t store anything in the banks anymore thanks to this service. They are obsolete if you want to use sound money. There are no fees associated with the use of the card. Members that store more than $50 in golden dollars do pay a small storage/membership fee of 10 golden cents or $2.50 FRNs and an additional 0.25 FRNs for every additional $50.
These $50 Golden Eagles can also be withdrawn and sent to you directly.The United Precious Metals Association has the full backing of Utah Attorney General Sean Reyes who also uses the service. The legal foundation was set up in 2010 and 2012 here in Utah where the vault is located. Many members of the board including General Counsel Larry Hilton are lawyers that specialize in law regarding the use of legal tender.
An elected board of members makes regular audits to assure that all of the gold and silver is there and reports to the general membership every year at the monetary summit. This year it will be held on October 17 in Salt Lake City. The vault is insured from theft and fraud via the Lloyd’s of London. They hold a 100% reserve ratio.
Accounts with UPMA can be opened on their website UPMA.org by anyone residing in the United States. They require only a name, a zip code, and an email address. It takes about five minutes. They can be reached for questions during normal business hours at 888-210-8488 or via email at info@UPMA.org(link sends e-mail).”
I particularly like the UPMA program because it completely bypasses the banking system. Even the card they selected, American Express, is not a bank card but a true credit card whereas Visa, MasterCard, and Discover are bank cards.
Anyone living in the U.S. can get a card without any credit qualifications because it works as a “prepaid” card drawing on your gold account based on what you have purchased in gold. And even better than Bitgold.com who charge a 1% fee this one actually pays you a 1% reward for purchases and pays this in gold.
Thanks to the age of the internet these opportunities now exist and are available and worth looking into.
The world is rapidly moving back to gold as a standard and we need to take note.
So where does God stand on the subject?
This brings me back to where I started at the beginning and where I think God stands on the subject.
Do I believe that God will send judgement on the U.S. for the predicament we find ourselves in?
And what about all the rampant sin and fist waving in His face and open hostile rejection of Him and growing persecution of His people?
The answer is absolutely not.
However, I do believe without His divine intervention the U.S. will suffer the consequences of its own misguided choices. Bad choices always lead to bad consequences and rejecting God and His ways is always a bad choice for an individual or a nation.
We can see the signs if we’re willing to take the blinders off and take a look at the evidence.
A couple of controversial books that I believe clearly demonstrate the destructive path our nation is on are “The Harbinger” and the sequel “The Shemitah” by Jonathan Cahn. He has gotten a lot of flak and has been accused of fear mongering and being a doom and gloomer. I do not find this to be the case. The amazing facts reported in these books are indisputable.
The hope is that as a nation, we will return to our core principles and do what is printed on our money and “In God we trust” again.
I have great hope for the future of our nation and the world because I know as a believer in Jesus Christ, we have already won.
I also believe that we have been given everything we need to succeed in expanding the Kingdom of God in the earth with the hope of every knee bowing and confessing that Jesus is Lord to the glory of God. (Philippians 2:10)
We are the only ones in this world with true hope and have been given the mandate and the authority to bring hope to the world. It’s time we got about it and see that we are here with a purpose given by Jesus to change the present world with His love, grace and power.
To do this we will need a paradigm shift from self-dependence to complete dependence on the Lord Jesus for our wellbeing, provision, and wisdom which from the Hebrew means having a “hearing heart”, tuned into what He is saying and doing whatever He says to do.
Getting past our own personal well-meaning agenda’s and asking the question, “What do you have in mind, Lord?” is the hard part.
There’s a reason you and I are here in 2015. He has an amazing plan for us if we are willing to hear from Him and then do whatever He says to do. If it sounds a bit adventurous and risky, trust me it is. But if you want to experience Him on a level where He can do more with one single word than we could hope on our own to accomplish by our best efforts in a life time, then take the risk and ask the question.
I am confident that what He has in mind will be more satisfying than all our efforts to take care of and provide for ourselves will ever accomplish and it will satisfy our universal need for peace, security, stability and put us in a perpetual state of wellbeing known as “His rest”. In a word, His shalom.
The world seeks financial, political and personal security and peace. It cannot be found outside of a personal relationship with the Creator and King of the Universe; Jesus Christ. After all he made it and knows how best to make it work.
My hope in writing this, is to not to cause fear but rather to sound a warning and to encourage you to seek the Lord for wisdom and guidance. He is faithful to provide both when we seek Him.
I do believe things are changing dramatically and my hope is that even if we as a nation go through some tough seasons of adjustments, that we as the people of God will shine in the midst of the darkness and lead the way for others to find their hope and rest in God alone.
I believe that if we seek the Lord for wisdom, He will give us revelation to understand the times He chose for us to live in and how to not only survive but thrive so that we can be a source of encouragement and comfort to people who are needing to know the hope that we have in Jesus.
I believe that shifting our dependence totally to God and His means for providing for us is essential for such a time as this. I encourage you to pray about these things and then take whatever actions the Lord leads you to take to prepare for the future.
So, I’ll end where I began with that intriguing verse from Haggai where the Lord declares,
“The silver and the gold belong to Me.”
I believe his ownership of the gold and silver is for the benefit of His children and for our well being.
After all, He doesn’t actually need it for Himself. I think He had us in mind when He said this so that we would know His intention of always having what we need to be safe and secure in Him even in sharing His possessions with us.
He’s really good that way.
My business is now devoted to developing a new technology for processing waste rock from old gold mines, tailings from mines that have been processed and still have precious metals, and other sources of precious metals.
I believe that this technology will be utilized on a global basis to release “the hidden riches, treasures stored in secret places” to benefit the Kingdom of God. I would welcome your prayers for the success of this business dedicated to “Venturing all for the Kingdom of God.”