Back Into The Future. ZeroHedge: Ron Paul Redux: "The End Of Dollar Hegemony" - The Roadmap.

  

  General Bernanke was fighting US Dollar debasing it for long seven years and now is more ammunition to come with Janet Yellen in charge at the FED. Ron Paul's speech from 2006 is the true classics now. He effortlessly connects all the dots with FED, US Dollar, Gold, FIAT currencies, Oil and War. Now we have the luxury to see and appreciate his knowledge and wisdom through the prism of time and latest events in the markets and geopolitics.
  Spend some time and educate yourself - you will get the best sense of the future by knowing the past.

Flashback - Jim Puplava: Janet Yellen to the Chair And Michael Woodford Is The New FED's Play Book. GLD, GDX, MUX, TNR.v

  "It is time to repost our entry with Jim Puplava and find out the implications of the nomination of Janet Yellen to the FED. We can expect the Gold price to be under pressure to impose the false interpretation of extremely bullish fundamentals, but this manipulation will end with the real fireworks in this sector. Debt ceiling increase will happen after all this political posturing and new Chairperson will be even more accommodative in its polices based on Michael Woodford's narrative."

Sci-Fi Movie Script: "Federal Reserve - Keeping The Strong US Dollar Policy From 1913 - Established To Serve and Protect" GS, JPM, BAK, C, HBC

China, EU sign $57bn currency swap agreement 

ZeroHedge:

Ron Paul Redux: "The End Of Dollar Hegemony"

In a little-known 2006 speech (in the US, though widely known around the world), entitled "The End of Dollar Hegemony," Ron Paul discusses the breakdown of the Bretton Woods system - which most people know about - and the de-facto system that replaced it - which most people do not know about. As Casey Research's Nick Giambruno notes it is a must listen with the most important part of the speech where Paul discusses the petrodollar system, a primary factor in maintaining the dollar's role as the world's premier currency after the breakdown of Bretton Woods.

The End of Dollar Hegemony Part 1

The End of Dollar Hegemony Part 2

The End of Dollar Hegemony Part 3

Via Nick Giambruno of Casey Research,

The speech is an absolute must-listen...

...

The most important part of the speech is where Paul discusses the petrodollar system, a primary factor in maintaining the dollar's role as the world's premier currency after the breakdown of Bretton Woods.

"It all ended on August 15, 1971, when Nixon closed the gold window and refused to pay out any of our remaining 280 million ounces of gold. In essence, we declared our insolvency and everyone recognized some other monetary system had to be devised in order to bring stability to the markets.

Amazingly, a new system was devised which allowed the US to operate the printing presses for the world reserve currency with no restraints placed on it—not even a pretense of gold convertibility, none whatsoever! Though the new policy was even more deeply flawed, it nevertheless opened the door for dollar hegemony to spread.

Realizing the world was embarking on something new and mind-boggling, elite money managers, with especially strong support from US authorities, struck an agreement with OPEC to price oil in US dollars exclusively for all worldwide transactions. This gave the dollar a special place among world currencies and in essence "backed" the dollar with oil. In return, the US promised to protect the various oil-rich kingdoms in the Persian Gulf against threat of invasion or domestic coup. This arrangement helped ignite the radical Islamic movement (Al Qaeda) among those who resented our influence in the region. The arrangement gave the dollar artificial strength, with tremendous financial benefits for the United States. It allowed us to export our monetary inflation by buying oil and other goods at a great discount as dollar influence flourished.

This post-Bretton Woods system was much more fragile than the system that existed between 1945 and 1971. Though the dollar/oil arrangement was helpful, it was not nearly as stable as the pseudo—gold standard under Bretton Woods. It certainly was less stable than the gold standard of the late 19th century.

The agreement with OPEC in the 1970s to price oil in dollars has provided tremendous artificial strength to the dollar as the preeminent reserve currency. This has created a universal demand for the dollar, and soaks up the huge number of new dollars generated each year.

Using force to compel people to accept money without real value can only work in the short run. It ultimately leads to economic dislocation, both domestic and international, and always ends with a price to be paid.

The economic law that honest exchange demands only things of real value as currency cannot be repealed. The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or euros. The sooner the better."

Ron Paul told me that although this speech is relatively unknown in the US, it was widely received around the world. As we discussed the implications of these issues, Paul said that the premise of this speech still applies today.

I believe that once the dollar loses its status as the world's premier reserve, the US will start to implement the destructive measures we frequently discuss: capital controls, people controls, price controls, currency devaluations, confiscations, nationalizing pensions, etc.

Such things have happened recently in Poland, Cyprus, Iceland, Argentina, Zimbabwe, Venezuela, and a number of other countries.

Take a glance at history and you will quickly notice these measures are the norm when a government gets into serious fiscal trouble. Many nations have made the mistake of thinking they were somehow "exceptional" and that these kinds of things couldn't happen to them.

There is no question the US is and will continue to be in serious fiscal trouble unless it implements drastic (and politically impossible) changes. The only saving grace for the US has been its ability to print the world's reserve currency. But once that special privilege is lost, it will revert to the measures all other governments throughout history have taken.

You absolutely want to be internationalized before the US dollar loses its status as the world's premier reserve currency. I truly believe the window opportunity to take protective action will slam shut at that time. You can find our specific guidance on how to do that here."

ZeroHedge: Did China Just Fire The First Salvo Towards A New Gold Standard?

  

  

  The buzz about Gold backed Chinese currency intensifies by the day. We continue our investigation.

What Is Our Money And Why China Plans To Move To A Gold Backed Yuan Currency.

 "This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

Alan  Greenspan  1966. "Gold and Economic Freedom" 

  We have more and more news coming out about the tectonic shift in geopolitical landscape and ongoing Currency Wars. China learns very fast, even if Maestro Greenspan has already forgotten the ancient wisdom. Further education will help to understand our flawed monetary system and the value of gold for the investors even if Bernanke, who is busy destroying the US Dollar with the FED "does not have any clue about it."

ZeroHedge:

Did China Just Fire The First Salvo Towards A New Gold Standard?

In a somewhat shockingly blunt comment from the mouthpiece of Chinese officialdom, Yao Yudong of the PBoC's monetary policy committee has called for a new Bretton Woods system to strengthen the management of global liquidity. In an article in the China Securities Journal, Yao called for more power to the IMF as international copperation and supervision are needed. While comments seem somewhat barbed towards the rest of the world's currency devaluers, given China's growing physical gold demand and the fixed-exchange-rate peg that 'Bretton Woods' represents, and contrary to prevailing misconceptions that the SDR may be the currency of the future, China just may opt to have its own hard asset backed optionality for the future; suggesting the new 'bancor' would be the barbarous relic (or perhaps worse for the US, the Renminbi). Of course, the writing has been on the wall for China's push to end the dollar reserve supremacy for over two years as we have dutifully noted - since no 'world reserve currency' lasts forever.

Over the last two years, we have noted:

"China Takes Another Stab At The Dollar, Launches Currency Swap Line With France",

"BOE and the PBOC announced a currency swap",

"Australia And China will Enable Direct Currency Convertibility",

"World's Second (China) And Third Largest (Japan) Economies To Bypass Dollar, Engage In Direct Currency Trade",

"China, Russia Drop Dollar In Bilateral Trade",

"China And Iran To Bypass Dollar, Plan Oil Barter System",

"India and Japan sign new $15bn currency swap agreement",

"Iran, Russia Replace Dollar With Rial, Ruble in Trade, Fars Says", "India Joins Asian Dollar Exclusion Zone, Will Transact With Iran In Rupees", and

"The USD Trap Is Closing: Dollar Exclusion Zone Crosses The Pacific As Brazil Signs China Currency Swap"

As a reminder, we noted here:

The question why China has been scrambling to internationalize the CNY has nothing to do with succumbing to Western demands at reflating its currency to appreciate it and thus to push its current account even lower in the country with the shallowest stock market and the most bank deposits (i.e., most prone to sudden, abrupt bursts of inflation), nearly double those of the US, and everything to do with preparing the world for the "final monetarism frontier", which will take place when the BOJ's reflation experiment fails, and last remaining source (at least before Africa, but that is the topic for another day) of credit formation - the PBOC - finally ramps up.

As we pointed out a few days ago when we discussed the accelerating Chinese credit impulse and its soaring 240% debt-to-GDP ratio:

 

What should become obvious is that in order to maintain its unprecedented (if declining) growth rate, China has to inject ever greater amounts of credit into its economy, amounts which will push its total credit pile ever higher into the stratosphere, until one day it pulls a Europe and finds itself in a situation where there are no further encumberable assets (for secured loans), and where ever-deteriorating cash flows are no longer sufficient to satisfy the interest payments on unsecured debt, leading to what the Chinese government has been desperate to avoid: mass corporate defaults.

At that point it will be up to the PBOC to do what the Fed, the ECB, the BOE and the BOJ have been doing: remove any pretense of money creation via the commercial bank complex (even if these are merely glorified government-controlled entities), and proceed to outright monetization of de novo created assets, thus flooding the system with as much money as is needed to preserve the illusion of growth. Naturally, with the Chinese stock market having proven itself to be a horrible inflation trap (and as a result the bulk of new levered money creation goes into real estate), the inflation explosion that would result would be epic.

And that, in a nutshell, is the reason why China is doing all it can to prepare for the moment when capital flows will soar once the PBOC no longer has the option to extend and pretend its moment of entry into the global reflation race. Yes, it will be caught between a rock (hyperinflation) and a hard place (a very hard crash landing), but the fact that neither of those outcomes has a happy ending will hardly stop the PBOC from at least preserving the alternative. That alternative will of course be to be ready and able to hit the switch when the BOJ's printer burns out, and someone else has to step in and fill its shoes in the global "money creation" strategy, which sadly is the only one the world has left.

Finally, the question then will be not if, or how long, the US Dollar will remain the world's reserve currency, when even the Developed world is forced to admit the PBOC's monetarist primacy over the Fed, but just how much unencumbered gold one has to hedge against what will be the final, global bout of hyperinflation, the one spurred by every single DM and EM central bank is forced to print for dear fiat status quo life, or else."