The Color Of Money: Is Debasement Coming Next?

The Brexit vote in the UK, the Trump Presidential electoral victory, the Pirate Party victory in Iceland and the recent voting result in Italy confirms a trend we had previously suspected, which is a rejection of the current political establishment and the congruent globalist agenda being pushed for previously (the creation of the EU was part of this paradigm and why the calls for exiting the European Union presently). In short, like many other things in life, it might sound good in theory but the practice is a whole other matter altogether. And it has been the average middle class electorate that has seen their own standard of living decline as a result, and thus the angst plus rejection of it coming to pass now. However, while the “Leave” movement in Europe and Trump supporters in the US toast their polling victories, there are some more serious and sinister problems at hand which no political victory alone will stop or stymie.


I speak of course about the economy and the various imbalances that have been built up over 8 years of foolish central bank policies, not to mention the previous problems that created the financial crisis in 2008 to begin with, which have never been resolved. But that aside, we have a more pressing problem of what and how the lauded alchemists of finance and money propose to do in order to right the ship (that they in fact help to tilt). In other words, the cure now may in fact be worse than the disease, for those caught off guard and unaware.


The first action plan in your own road to recovery should be, in my opinion, to turn off and stop listening to the main stream news media. That includes CNN, the so-called financial new networks and establishment hacks such as Paul Krugman from the New York Times. Such media channels are nothing more than propaganda units merely repeating managed (falsified) government statistics which are done so for the purpose of illusion. I say this not to be mean or arrogant but rather because when you dig through the real statistics, you often find a very different result than what you are being told as the official story. For example, very recently in the US main stream media news it has been reported that unemployment has declined in the US. However, how can this be when the US Labor Participation rate is NOW at a 40 year LOW? So if there are less people in the United States working, in terms of percentage of working eligible adult population (Labor Participation), then how on earth can there be a claim unemployment has dropped? In other words, the government and main stream news media narrative does not jive or square off with reality. Politicians of course have an agenda, a vested interest in making the electorate, the population, think they somehow have had a hand in improving the economy. The dissemination of this done through main stream media that does not bother to fact check or investigate. In order to make sounds decisions in your own personal life and in business, you need to know the TRUTH.


Who then is telling the truth? Good question. The answer is those people in the private sector either managing money for their own clients or providing subscription based advisory publications. Such persons have a very direct vested interest in getting the information correct because if they do not, they loose clients and income. In other words, their reputation is on the line. When was the last time a main stream news media anchor lost their US$10 Million employment contact because they reported false statistics, and fake government information? Never, as far as I can tell. And many of these people in the private sector write articles and do video interviews for the simple purpose of self promotion, but that does not mean it is incorrect information. Why not take advantage of the information they provide? Consider it a job interview on their part, telling people what they know and allowing you to decide if you want to become a future client of theirs. Interestingly enough, former US Federal Reserve Chairman, who did a real life version of Mr. Magoo when holding that job, now of all a sudden has clarity of vision and helpful insight now that he is back in the private sector advising clients. A man who claimed while an employee of the Fed that asset bubbles were difficult to spot and predict now can see them without any difficulty as a private citizen. Going back to, or existing in the private sector seems to be some kind of truth serum it would seem.


In any event, this leads me to some information that came my way about 18 months ago regarding a supposed plan for a new US currency. Allow me preface this by saying it was an idea allegedly discussed, along with a number of other things. I do NOT know if there will be any implementation of it, but to quote a line from the science fiction film DUNE: The first step in avoiding a trap is knowing of it's existence in the first place. With that said, on the surface there is nothing wrong with the idea as governments periodically issue an new note or coin either to commemorate some historical national figure or to offer some kind of improvements regarding anti forgery features. However, when a new currency is being introduced as a remedy for economic or financial problems, then that is where the potential for mayhem comes into play. Especially so if the exchange rate for the old currency versus the old is not one for one and or if there is a plan for a dual currency system (one currency for use internally in a country and another for international use and trade settlement). Allegedly, in conjunction with a new currency issuance, the supposed plan is a 50 percent devaluation. So, just keep in mind if you do see the implementation of a new monetary unit, devaluation is a very real possibility to follow.


The congruent gossip going around has also involved some use of the SDR or Special Drawing Rights digital currency used by the IMF, International Monetary Fund. The SDR is nothing more and nothing less than a digital fabrication, in the form of a basket, of existing major fiat currencies. The big news regarding this basket recently is that the Chinese currency would now be included and given an allocation. While this has some limited implications for finance, on main street it is a non event. Regardless, I would agree with Mr. Andrew Hoffman, who like myself sees such an idea as folly. If one fiat currency is going down the proverbial tubes, what is the outcome of switching to a another digital basket of fiat currencies in the same boat? Stated more plainly, when does putting four supposed healthy tomatoes together somehow rejuvenate the one rotten tomato?


How can we be sure currency devaluation is in game plan? They say that history does not always exactly repeat itself, but rather it does rhyme a lot. In this regards, politicians and political leaders of various kinds have almost always resorted to currency debasement as a way to eradicate it's debts. There are three basic options for governments and they are as follows: A. Increase taxes and tax collection to acquire additional revenue to pay debts (not a smart idea politically, especially if you are hoping for re-election), B. Outright default (in which case you ruin the nation's credit standing) or C. Inflate your way out of trouble (other wise known as currency debasement or currency devaluation). Most politicos would tend to prefer option C because it is something that can be done in stealth (without the population immediately knowing about it) and it does not require any additional forms of tax collection nor current government austerity measures. However, the beneficiaries of such a plan are those that obtain the devalued currency FIRST, before anyone else is even aware of it. So, our beloved politicians can pay off the government debts with such newly issued debased money with the recipients believing they are receiving fully valued money, only to find out perhaps 12 months or so later that they are living in an inflation nation. And at which point the politicians can blame the price of petroleum, the Russians or whatever else makes for a publicly acceptable excuse at the time.


But make no mistake about, debt and deficits do matter in the real world. And the world right now is awash in debt, US$200 Trillion (that's with a “T”) of the stuff, which equates to roughly 300 hundred percent of Global GDP. The US share of the global debt is about US$60 Trillion, which of course includes government, corporate and individual consumer debt.


Ms. Carmen Reinhard opines: Experience teaches that countries reduce debt relative to their income in five ways: economic growth, substantive fiscal adjustment or austerity plans, explicit default or restructuring of private and/or public debt, a surprise burst in inflation, and a steady dose of financial repression that keeps real interest rates low (usually negative). The last two options — inflation and financial repression — are only viable for debts denominated in domestic currency, As they have historically in the aftermath of financial crises or wars, central banks have been increasingly resorting to a form of taxation that helps liquidate the huge overhang of public and private debt and eases the burden of servicing that debt. (Note: inflation is a form of hidden taxation on the populace) http://financialrepressionauthority.com/2016/11/30/carmen-reinhart-financial-repression-requires-a-captive-audience-2/


In summary, beware of more central bank chicanery involving the currencies and values of same as they seek to remedy the previous remedy. In other words, their cure may certainly be worse than the disease they left unchecked and made exponentially worse.


About The Author: This article was written by John Schroder of Ascot Advisory Services. John's firm has been helping clients in the Dominican Republic for the last 17 years with residency application services, naturalized citizenship filing, banking assistance and legal services pertaining to real estate (title transfers, legal representation at closing, sales contract review). You can contact him by telephone at 809-756-1917.