Gold Moving To A Sound Money System Is One Of The Big Trends

This article summarizes some really excellent thoughts that money manager Catherine Austin Fitts shared with USA Watch Dog in this must-listen video. She covers several topics, from very long term trends to very specific ongoing evolutions. Here focus, however, is really on the deteriorating financial and monetary system, as well as the ongoing financial repression. The net result is a transfer of wealth from the largest part of the population to a  very small elite.

Big trends

She sees a couple of very big (long term) trends.

  1. We have a group of people using the financial system to centralize control. We are in a process of an enormous centralization of control going on.
  2. We have globalization. We are going from a world where we are competing globally instead of domestically (look at labour as an example).

Related to the current economic model, she says it is an unsustainable model. For 500 years, it is a debt based model with the central bank at the core. As this cannot go on for long, there are three options: (1) depopulate (2) change (3) return to sound money. The latter topic is discussed below.

During the 90’s developed nations have issued more and more debt. Those assets and resources have gone into the corporate world, which they used to develop businesses globally. Up until recently, bonds (municipal, corporate, government bonds) have held their value or have gone up as interest rates have gone down. Not this trend is reaching the bottom of the channel. The big question from here on is what will happen: (a) will money flow to equity markets as to match the increase in the bond markets (b) will money leave the bond market and go to equities and tangible assets.

Currently, we are in a risky environment. On the short term, anything is subject to volatility. Diversification is advised, concentration on one asset class is not a good idea as anything can happen.

We have a political problem, not an economic

We are entering a world where politics play out in the financial markets. We are seeing politics playing out in the financial markets. US central bank buying huge amounts of mortgage backed securities. They are buying a monthly 85 billion US dollars which are worth 20 billion US dollars. That money is finding its way in the equity markets. What are the American companies doing with it? A recent study has shown that 50% of their earnings growth comes from re-engineering their balance sheets and buying back their stock. It’s not fundamental economics but financial engineering that is lifting this. The companies use those resources to enter markets throughout the world. This is part of the currency wars: certain countries flood up their equity markets using monetary policy, those companies using it for huge strategic benefit worldwide.

When being asked about potential collapse as a consequence of the worldwide money creation, her answer was that we should expect one of the following:

  1. We will see a crash and things go back to fundamental economics
  2. This problem will be solved with war and de-population. Over the last 20 years, because of economic warfare, some places have been harvested to keep the game going. Wealth is being centralized. Those people can always compose the next place to keep the game going.
  3. There is a tremendous potential of technologies coming out. They can increase productivity in developed and emerging that there can be enough for everybody. There is enough for everybody in the world to propser. We don’t have an economic problem, but rather a political problem. A group of people above the law and centralize power.

Gold being part of a new sound money system

Her thoughts about gold?

First, it is very acceptable to expect that the gold price was pushed down lately, because the yields on 30 yr bond returns has been declining too fast (referring to the 6 month average 7.6% decline of 30 yr bonds till February of this year).

Next, there is broad based bull market in gold because of massive demand out of emerging countries like China, India, Russia, and others. That’s good. But what is the big picture of gold’s evolution? Here it gets interesting. Catherine Austin Fitts’ view is that more of a sound money system in which gold is a part. Also more of an equity system which she considers good because a debt based system is a very unhealthy system. By contrast, an equity based system necessitates cooperation and a willingness to create value.

How can individuals accumulate wealth in this environment?

Where does all the above leave us, individuals and households?  They key question is how we can accumulate assets in an environment where a number of people at the top are centralizing control, operating with impunity above the law. The key answer is that not one asset is the magic bullet. Right now, the greatest danger is slow burn. Because of slow burn, the expenses of households and invididuals keep on inflating at the rate of 8% approximately, while the incomes go down and the yields on bonds go down.

In an earlier video, Catherine Austin Fitts explains into more detail the concept of “slow burn”. She says: We have a politically managed where a small group of insiders have built enough of an infrastructure of control so they can literally always harvest the outsiders for the purpose to keep the system going, and keep themselves rich. Over the last 15 years we tremendously centralized wealth and control of the economy into this group while the outsiders have been harvested. In the 90’s for example we adopted the strong dollar policy, the next round of GATT (General Agreement on Tariffs & Trade). Another example is inflation; the debasement of the fiat (paper) currency has been huge diluting the average household savings and their money. With these policies we shifted trillions of dollars out of this country (some legally, but a lot illegally) to reinvest in the emerging markets and other area’s. The slow burn is this process of constantly harvesting of the outsiders. This is a way of keeping the system going although it is not economic efficient. The broad and middle class (in Europe and the US) has been eaten alive by this slow burn.

Catherine Austin Fitts did set up to help people propser in this new world environment. Gold Silver Worlds strongly recommends to subscribe to the excellent service or sign up for free e-mail updates!
We thank reader Steve B. from Sparks bringing this excellent video to our attention.

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