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Could the “Big Reset” become a reality?
Richard Nixon removed the dollar from the gold standard in 1971 – ushering in a decade of devastating stagflation, a bear market in stocks, and a massive destruction of savings. When Nixon made the fateful decision in 1971 to end the direct convertibility of the U.S. dollar to gold, he stuck a dagger in the heart of the longstanding Bretton Woods system that had governed the world economy throughout the era of post-war U.S. hegemony.
It worked brilliantly for a while. But the combination of the 1965 implementation of Medicare, the costs of Lyndon Johnson’s “War on Poverty,” and massive Cold War spending on Vietnam and elsewhere threatened to strain the economy to the breaking point.
Guns, butter and sound currency. Pick any two. Something had to give. And as we now know, that something was sound currency.
Nixon originally hoped to reform Bretton Woods, not destroy it. But reform efforts failed, and by 1973 it was official: The gold standard was dead, and the dollar was a ‘floating currency.” As a result, the dollar was sapped of a third of its value in the 1970s. Interest rates were crazily high – but in some cases, still not high enough to compensate for inflation. Lenders began to experience negative interest rates.
Savers were devastated, and debtors were rewarded, as they could payback big loans with small dollars. And U.S. debt soared. Since the mortgage crisis of 2008, the Federal Reserve has pumped out more than $4 trillion in fiat money. That’s roughly equal to a quarter of the size of the U.S. economy. That has to leak out at some point.
“No great nation that abandoned the gold standard ever stayed great.”
–Ronald Reagan
Total debt has soared to over 300 percent of the U.S. GDP. All told, Americans have to pay financiers some $60 trillion. Plus the federal debt.
Fast forward to 2018.
Investors are starting to whisper about the most radical financial reform we’ve had since the Nixon Shock: The “reset” of the U.S. dollar, and the return to a gold standard. Sure, it’s an outside shot. There are a lot of entrenched interests in keeping the status quo. But if any major national politician is willing to buck the system to get us back to the gold standard, it’s Donald Trump.
The theory: Trump will secretly bring delegates from great economic powers like China, Japan, Germany, France and the U.K. together and get them all on the same plan: Return their currencies to the gold standard – and lock in a sound currency system for all. Of course, everyone will have to play ball. There would need to be strict penalties for countries that seek to advantage their exporters by inflating their currencies again, in a beggar thy neighbor ploy.
But that can be worked out, and Donald Trump is a veteran dealmaker.
If it happens, it could send gold soaring tenfold.
Why? Because the great economic powers of the world will have to start buying it up again – creating a massive surge in demand for bullion.And the U.S. and other governments could act as market-makers – agreeing to buy and sell gold to maintain the market price at, say, $10,000 per ounce.
Currently, gold is trading at $1,338 per ounce. At the moment, the world central banks have been buying gold at a relatively slow pace of 370 tons per year. That’s the slowest it’s been in seven years. That tells us that demand for gold is currently about as low as it’s going to get.
Meanwhile, Venezuela has been dumping gold on the market, in a desperate attempt to raise cash, and depressing the market. That can’t go on for long. Venezuela is running out of gold fast. When it does, look for gold prices to bounce.
Signs of the Great Reset
If work on the Great Reset begins in earnest, don’t expect to read about it in the papers. When Nixon took us off the gold standard, he met with advisors in secret, and didn’t leak a word of it in advance. And it probably won’t “leak” this time. Instead, look for the world’s central banks to quietly begin buying with a vengeance. As demand increases, so will prices, and we could see a zoom towards $10,000 long before anyone breathes a whisper of a reset in Washington.
Buy gold.
We recommend investors get out in front of this movement with at least a portion of their portfolios. At Monetary Gold, we make it easy. To speak with one of our gold and precious metals investment experts, call us today at 888-411-GOLD (4653). Or click here to request a free kit.
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