As usual, "The Privateer" author Bill Buckler does a great job at summarizing a complicated, and quite terminal, situation in a few short sentences. Today is one of those occasions.
The Four Harbingers Of The Apocalypse:
There are four indicators today which show as clearly as anything can be shown the state of our global debt-based monetary and financial system. Any one of them alone should be all the evidence one needs that the system is unsustainable. Put them together and much more than the canary is singing.
- First, the most popular (measured by its nominal “value”) investment vehicle today is a combination of a bet that sovereign debt will go bankrupt and an “insurance policy” that if/when it does, the holders of the debt paper will be made whole. These are called “credit default swaps” or CDSs, conceived in the early 1990s and unleashed on the investment world shortly thereafter. The total of CDSs outstanding doubled every year from 2003 to 2007. This growth paused in 2008 - early 2009 and then exploded again with the onset of “quantitative easing”.
- The second indicator is the mere fact that it is now universally accepted in the investment world that the only “safe” government debt is one issued by a government whose central bank has demonstrated its willingness to print money.
- The third indicator is the fact that the “sovereign debt crisis” hype is focussed exclusively on Europe in a desperate attempt to prevent the discovery that everybody is in the same boat.
- And the fourth and last is Gold. On the paper markets, the price of Gold can and is being manipulated. Beyond Gold’s price appreciation is the ever increasing global demand for physical Gold and the fact that central banks throughout Europe and Asia are ADDING to their supply.
The worse the situation gets, the more dangerous becomes a “promise to pay” which relies on nothing except a central bank’s ability and willingness to PRINT. In these circumstances, the last paper asset standing will be the “money” - the actual CASH money - itself. Everywhere today, cash is king. But that old saying comes from an era when there were still limits on how much of it governments could create. Those limits have long since been removed. For REAL markets - you need REAL money.