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Affluent Investor | June 26, 2017

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Germans and Their Gold: U.S. Dollar No Longer Reserve Currency

“We Spaniards know a sickness of the heart, that only gold can cure.” – Hernando Cortez

The mainstream media did their duty this week and duly reported that the German government was beginning the process of repatriating their gold reserves stored in Western central banks since WWII.  And, that was it.

This was the biggest economic story to hit in a long time, and it was almost completely ignored.  The stated motivation was a desire to have the gold back home since there was no longer a threat from a Soviet invasion.

Well, thanks to alternative news outlets like The Brenner Brief, we can explain the real reason.

This action by the Germans is a turning point in the history of the modern Western world.  It is a fulcrum point in history.  And, there is a reason the MSM ignored the story.  It’s because the truth hurts. It doesn’t fit their narrative.

Since the Bretton Woods agreement, the U.S. Dollar has been the world’s reserve currency.  This means that when countries have wealth that they want to store and be assured that they don’t lose money, they buy Dollars.  The USD was also used to correct the balance of payments among countries.  Instead of moving gold around constantly to facilitate this, governments deposited gold at central banks and this covered any payments needed to be made.

The Germans repatriating their gold means nothing less than the German government no longer having faith in the United States currency, and no longer believing the USD will be the world’s reserve currency in the future.

This is monumental.

Speaking as an old bond trader, the Dollar has a reserve currency bid.  In layman’s terms, it means there is demand for the USD on the world market as countries buy it to store their wealth in something they believe will retain its value. If this bid goes away, there will be nothing to hold the value of the Dollar at its current levels.  There will be less demand.

The Russians and the Chinese are actively working to replace the Dollar as the world’s trading currency.  What will take its place?  The Chinese Yuan?  UN Special Drawing Rights from the IMF?

This action by the Germans is a direct result of uncontrolled and unsustainable spending by the U.S. Federal Government.  It is a direct result of quantitative easing by the Federal Reserve. In Boliviathey call it printing money — here, we call it quantitative easing.

If you could pick up gold off the ground just like a fallen leaf, would there be any value?  After expanding its balance sheet by $4 trillion, the Fed is making the Dollar worthless, just like leaves on the ground.

Why would any foreign country expect that the Dollar will hold its value in the future?  Why would they want gold at the Fed to cover payments if the USD is no longer the world’s reserve currency?

It makes perfect sense for the Germans to want their gold back.  And, it’s not because they no longer fear the Soviets.

Rather, the Germans are looking out for number one.

We are entering dangerous times, my friends.

Buy gold.

 

Article originally published on The Brenner Brief.

Born in Georgia and raised in Savannah, Todd spent his early summers in Carp Lake, Michigan listening to the vivid stories of his grandparents recalling their youth in the northern wilderness. Ever since his earliest days, he loved story telling.

Todd left Savannah in 1982 to attend the U.S. Air Force Academy in Colorado Springs, CO where he studied aeronautical engineering. Upon graduation in 1986, he immediately left the Academy for flight school. His initial assignment was flying Combat Search and Rescue helicopters at Elmendorf Air Force Base in Anchorage, Alaska. In the UHAE (Unique Harsh Arctic Environment-pronounced “Yoo Hay” by Alaskans) he flew local rescue missions and was also deployed throughout Asia. During this time he was credited with saving many lives and even more assists. In addition to flying exciting missions, Todd also managed to graduate from the University of Alaska Anchorage with an M.S. in Engineering Management. In 1990 he volunteered for Special Operations and went back to flight school. In 1991 he was assigned to the 20th Special Operations Squadron at Hurlburt Field, FL, flying MH-53J Pave Low helicopters. Immediately he was deployed to Kuwait. Over the next three years he was active in classified missions in support of counterterrorism under the control of the National Command Authority and deployed throughout the world. His customers included SEAL Team Six and Delta Force. He left the Air Force as a Captain in 1994. During this hectic period in his life he found time to write his first novel, The Ultimate Solution which was never published. He did publish an article in the Armed Force’s Journal in 1994 on Special Operations Aviation.

1994 found Todd joining an investment bank and earning a chance to expand his knowledge of his other passion, Finance. During this second career he became highly knowledgeable in Emerging Markets Fixed Income and traveled a great deal internationally with a focus on the Caribbean. He has conducted business in over forty different countries. He became acutely aware of the consequences of economic decisions and their effect on national and economic security.

However, Todd.’s love of storytelling was uncontrollable. He left the financial business in 2011 to write. Currency was published in December of that year. Once he began typing, he never stopped.

Todd lives on a three-hundred year old farm in Connecticut deeded by King George of England with his children.

 

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