In modern democracies, this is why the source of political power increasingly lies in the deception of the public, and why both control and debasement of a currency is its ultimate expression. The true purpose of the debasement of the currency is very rarely understood by a trusting public. The existence of a state-issued currency is blandly accepted as proof of its value, and no further questions are asked. The long-term decline in its value is given credibility by being declared to be official monetary policy, so everyone thinks it is a good thing. But the public are wholly unaware of the transfer of wealth from them to the state and its cronies, which is the inevitable consequence of monetary debasement.
It is anti-capitalistic in its destruction of both capital and values. The political class has been progressively leeching off the productive side of the economy to pay for its socialising schemes and for the sheer enjoyment of power. If the rate of currency debasement is slow and even, it can continue for a long time. As a destructive process, it is ultimately finite. But the pace has quickened. The Lehman crisis led to a rapid acceleration of the rate of currency debasement, which never really ceased. Debasement is about to accelerate yet again. Not only will the issuance of central bank money substantially increase to compensate for a slowing down in the rate of bank credit expansion, it is also becoming essential to finance government spending.
The likely scale of a renewed debasement of the currency threatens to alert the public to the instability of the situation, undermining confidence in unbacked currencies. Despite the stated intentions of monetary policy, its true purpose will become increasingly obvious when government revenue collapses and welfare costs rise. How convenient it will be for scaled-up quantitative easing, the printing of money to pay for government debt, to be slavishly supported by all advisors and commentators pretending to be economists. Wiser counsel, if it is listened to, will caution against the trap of relying on the destruction of currency values as the bedrock for future government finances.
What then for our politicians, who have come to rely on monetary debasement to finance their ambitions? Will they wake up to the predicament they have put us all in, and suddenly realise they must humbly genuflect at the altar of contrition, of sound money, and confess to their sins and submit themselves to public opprobrium?
Dream on, folks! They will struggle to extricate themselves with the only means at their disposal. More money. More socialism. More raping the productive economy by accelerating wealth transfer through monetary debasement. They know nothing else. They have not only deceived their voting public, but they have deceived themselves. If the world moves only half-way to a 1930s depression, the rate of monetary expansion to bridge the widening chasm between tax receipts and welfare obligations will be so great, it will likely lead to the end of the dollar, the end of the euro and the other currencies which copy them. Even the hitherto Teflon yen will be threatened with immolation.
The wise heads in China foresaw this in the last century, which is why they appointed the Peoples Bank to handle the state’s gold and silver purchases under government instruction. It is why they set up the Shanghai Gold Exchange in 2002 to allow and encourage the population to accumulate physical gold. They knew that one day, gold and silver would become the backbone of currencies again and they have ensured it is widely distributed. They knew the West’s Achilles’ heel was the modern equivalent of Genghis Khan’s mulberry-leaf paper, but without the great man’s despotic authority. In her long history, China has been there, seen it, done it, and has got the changshan.
Russia was late to this party, but the transformation in her understanding of the West’s monetary affairs was swift. America tried to use the dollar as a weapon to cripple Russia, but President Putin wasn’t to be panicked. He appointed a bright young woman, Elvira Nabiullina to head up the Central Bank of Russia. She reformed the banking system, strengthening commercial banks and replaced the Brussels-based SWIFT interbank messaging system with its own, which will link up with the Central Asian ‘stans, China, Iran and even Turkey. This will insulate Russia from Western banking crises, a point missed by Western commentators who only see isolationism. And it is Nabiullina who has overseen the selling of dollar reserves for gold bullion.
Russia and China have distanced themselves from the west’s financial system, so it can collapse without taking them down. Obviously, there will be collateral damage, but nothing unforeseen. They will be aware of the political consequences, so will not want to precipitate anything with their actions. Let the West destroy itself and for China and Russia not to be made the fall-guys.
- Source, James Turks Goldmoney
