It is absolutely imperative for investors not to worry about the short term irrational moves of markets and not to listen to government figures or central bankers who make political statements that bear no resemblance to their actions.
As I have discussed many times, the currency wars are continuing and in my interview last week I discussed the ECB, BoE making statements that rates would be low for a foreseeable future due to pressures in these economies. The same is of course true for bankrupt Japan. Well the desired effect of weakening European currencies didn’t last long. This week Bernanke basically said the same as last week but the markets reacted differently and he achieved the desired effect of the dollar falling rapidly….
But investors must not listen to the noise and try to interpret every single word that these politicians/central bankers utter. Because there is absolutely no chance whatsoever that they can change the direction of the inevitable. I wrote an article in May 2010 called “Alea lacta Est” (the die is cast). So the die was cast many years ago and there is nothing governments can do today to stop the continued decline of the world economy and the collapse of all major currencies.
Since the creation of the Fed in the US in 1913 (a privately owned central bank set up for the benefit of commercial bankers), all currencies have declined 97-99% in real terms. And real terms, of course, means gold which is the only money that can’t be printed and the only money that has survived for 5,000 years. The century old collapse of paper money is shown clearly in the graph below (courtesy World Gold Council).
So we only have another 1-3% fall of most currencies in order for them to become totally worthless. That seems very small compared to the fall in the last 100 years. But if we measure from today this will mean a total collapse of the currency system as we know it.
Again, history will tell us that this has happened many times before and the chart below shows how the silver content of the Denarius (silver money) during the Roman Empire declined from almost 100% silver content to 0% from 180 to 300AD.
In 180AD just before the final collapse began, Cassius wrote: “Our history now descends from a kingdom of gold to one of iron and rust, as did the affairs of the Romans that day”.
In my opinion 180AD can be compared to 1913 when the decline of the monetary system started. The next few years will just finish off what started in 1913 making paper money totally worthless. But sadly this will result in a decline in the world economy both economically, financially, politically, geopolitically and morally to a degree which will make the world a much less pleasant place to live in – “a kingdom of iron and dust”.