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Tuesday, November 13, 2018

Amid Global Economic Concerns, World Returns to Gold

Dr. Makhdoomi states when people loose faith in a government, the solution is precious metals.

world return to gold over currency

Despite the outwards appearance of stability, the global economy runs on an inflationary system that confines it to an endless cycle of crashes and reboots. And, according to Greater Kashmir's Dr. Makhdoomi, the world's economic woes can be traced to the abandonment of the gold standard, albeit much earlier than the Nixon Shock in 1971.

Two and a half millennia ago, the government of Athens used a sound economic system with a set currency value based on physical gold writes Greater Kashmir. Yet wartime expenses drove the government to inflate its bullion reserves by minting coins of a lesser purity. With the addition of copper, 1,000 gold coins became 2,000 and the government had enough leeway to fund its ventures, even at the cost of currency stability.

As simple as it might seem, the very same method of funds creation is used today by governments around the world at a much larger scale. As Makhdoomi explains, any spending done by a modern government is done in the red, as no sovereign country operates without a budget deficit. When a central bank needs more money, the solution is to simply print new currency and worry about the inflationary consequences later. According to the article, the problem is exacerbated by the issuing of government bonds, which create more money out of thin air.

Makhdoomi points out that, when given enough false assurances, the people can and will lose faith in a government. When they do, he says the solution is always to rush back to precious metals as a way of preventing wealth erosion amid increasingly questionable central banking practices.

Consumers have come to equate money with currency, even though the latter has no intrinsic value and is merely a government's promise. According to the article, the price movement of gold in dollar terms is a perfect example of this, as an ounce of metal went from $40 in 1971, when President Nixon moved away from the gold standard, to over $1,200 today. The jump in value illustrates how much money has been printed since then in a baseless free-floating currency system.

Makhdoomi, however, believes today's gold prices might still be far lower than they should. Some pundits, such as monetary historian Mike Maloney, believe that an economic crash is closer than most think. When things go awry, Maloney expects gold and other precious metals to come under revaluation with a rapid price jump to $5,000 an ounce.

Both Makhdoomi and Maloney agree that the next major crash will be accompanied by a wealth transfer. Depending on whether one invested in gold or kept their faith in currencies, this could either translate to massive profits or a risk of losing everything.

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