The End of Fiat Currencies is Near

My next door neighbour cornered me the other day and asked me to explain what’s happening with gold.

The trouble is no-one teaches you anything about money when you’re at school, and yet we all need it, spend it, and use it every day.

There are a couple of very important things one needs to know about money. First, it isn’t worth anything at all. Despite what is printed on UK bank notes, you cant exchange a small piece of paper masquerading as money for anything else that can also be used as money, except either gold or silver. And with fiat money you cant even do that

Across the globe everybody is using what is called fiat money. Paper money is alright so long as someone else accepts it as having value.

The US dollar supposedly is backed by the full faith of the American government. The trouble is that faith is slipping rather badly. The latest US budget proposals for 2025 show the US running a permanent budget deficit. When people start to realise that the US is effectively bankrupt they start to get rid of the dollar. The more they get rid of the currency, the more its value falls. It simply becomes a matter of supply and demand.

Fiat currencies also only have value in terms of other currencies. In short, exchange rates float up and down as each currency is seen by its users to have a certain value, usually in terms of international trade.

The alternative to a fiat currency is a hard currency, which is one that is backed by what is generally regarded as real money, namely gold.

Up until 1971 the US dollar was valued at $35 an ounce of gold. There was a run on the stocks of US gold, mainly by the French and Germans, and president Nixon took the dollar off the gold standard, officially as a temporary measure. It’s value has since plummeted, and the US has printed so much paper money that there is no way it can ever take the dollar back onto a gold standard without bankrupting the state.

The same is true of sterling. Sterling was once backed by gold. There are still sovereigns in existence which were originally valued at £1 in gold content. A sovereign would these days value against gold closer to £500, which shows just how much value the paper (fiat) currency has lost over the years.

The thing is, times have changed, and governments around the world have played fast and loose with money, and rather a lot of countries are, as a result, bankrupt. That includes the USA, Canada, and almost all of Europe.

What this means is that there is a move to return to a gold-backed standard in some countries, especially in Russia. That, not to put things too drastically, will really put the cat among the pigeons.

There are two basic problems with such a move. The first is the amount of gold any country can use to underwrite the value of its currency based upon the new standard. After all, if you dont have any gold, what are you backing your currency with?

The second problem is, what happens when there are two valuations in use across the world? Clearly a fiat currency will find its value dropping quite drastically if it cant back its currency against the new standard. That will lead to some serious problems for countries that need to import basic materials.

The specific problem I have repeatedly mentioned for Western Europe is that the area is over populated, and is short of commodities and energy, both of which it needs to import. If a country has to pay for imports in a fiat currency, and those goods are  being imported from a country that wants to be paid in a hard currency, the importer will first have to buy the hard currency with a weakening fiat currency. It doesn’t take a genius to realise what is going to happen going forward.

The question now arises: where do you live, and is your country going to be able to go onto a gold standard?

If the answer is No, then you are headed for a seriously weakening standard of living.

Of course, there is a third question, and that is: How much gold do various countries hold?

There are official figures, but how reliable are they? For instance in India the population has traditionally bought and hoarded gold in the form of jewellery. It is estimated that Indians own about 21,000 tons of the metal, but the official reserves are about 800 tons. If you set that against the USA’s gold supposedly stored in Fort Knox there is a vast disparity as the official US holding is about 8,000 tons.

US gold holdings have not been audited in decades, and China refuses to list their official store. At the moment we are all guessing.

What is also a matter for guesswork is what will happen to the euro when Russia finally decides to put the rouble on a gold standard. With the euro having no backing at all its value will start to slide. That’s when there will be pressure on the various member states to pool their gold with the ECB. That will really cause a riot. Germany, Italy and France all have large stores of gold. Will those governments decide that staying in a euro zone and using a fiat currency is going to be good for their economies? Are they going to give their gold to the tender care of the fascists in Brussels? I would have thought the answer is going to be “Not bloody likely?”

There is then the delicate matter of valuing currencies against gold.

If the US decided to revalue its gold reserves, and assuming the 8000 tons figure was correct. What would an ounce of gold have to be revalued to?

I get dizzy doing the maths.

This is where things get seriously difficult. I am not going to guess where the price of gold is going, but it isn’t going down. One thing is certain and that is that drastic changes are coming.

I’m sorry to say that in whichever direction I look there are serious problems facing Western Europe, and the rest of the world not only doesn’t care, but I think they are rather enjoying our difficulties. And they are definitely laughing at us for thinking Russia wants to invade Western Europe. I mean, look around you. Who would want to invade this mess?

In the meantime be very careful about buying real estate. Although there are deals out there, the markets are heading for a rather nasty fall. Buying time is coming, but not yet.

I dont usually suggest videos for you to watch, but a recent one was on the topics I have been discussing recently, and it was very much to the point. I think people should watch this. Here’s the link:

The final point Professor Hudson makes is something that most people are missing. China and Russia and the BRICS countries are no longer interested in Europe or North America. In fact, they have had enough of their interference in their lives and are happy to turn their back on them. What this really means is that the Collective West is being sidelined or ignored.

If you are young and want to be a success, you need to get the hell out of the West!

Next week I am going to look at what is happening where I live. There is a huge disconnect between reality and the average person’s perceptions. That is going to cause a lot of heartache in the future. I will show you what I mean.