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Economics

Ben Davies: The World Monetary Earthquake, The Dash From Cash

Ben Davies, of Hinde Capital, has written an excellent article about all of the fiat currency devaluations that have been going on recently around the globe. He spoke about this piece with Eric King, in the 10-minute interview below:

The thrust of the argument is that a ‘Bretton Woods II’ arrangement has arisen in the last few decades based upon the Renminbi-Dollar peg and the three-legged tripod of the Chinese and the Americans, with the Japanese trapped between them.  This crystalline financial peg, held in place by the tripod, has supported the creation of a hugely imbalanced global financial structure rising above it into the clouds.

The subsequent and necessary unwinding of this peg in the last few years — as spoken about at length by men like Jim Rogers — has then become the internal engine of the world’s external financial problems, as this complex structure of pegged falsity twists painfully into a simpler more truthful shape.

The theory of money is like a Japanese garden: simple on the surface, but filled with subtleties that emerge after prolonged contemplation.

Milton Friedman

Davies argues that we may reach the point soon where this Hector-like crystalline fiat currency system will fracture and shatter completely, under the unrelenting stress of the Achilles-like unwinding peg, to be replaced by an honest metals-backed monetary system.

Until that shatter-point is reached, the current wave of currency devaluations will continue as the torque force of $3 trillion dollars of US assets in China and the $1 trillion dollars of US assets in Japan spins outwards, while the world’s governments constantly try to evade and escape this splattering deluge by devaluing their currencies. (These devaluers include the Swiss National Bank, the one former reliable home of ‘solid’ fiat currency, hence the rush to gold rather than to the Swiss Franc).

Paper money systems have always wound up with collapse and economic chaos.

Howard Buffett, former four-term US Congressman from Nebraska and father of Warren Buffett

Calling into question the entire Fractional Reserve Banking system, Davies declares that “the world is one big version of Zimbabwe”, and that “the pied-piper is a’calling”, because the whole world cannot export at the same time, which is the usual aim of one country engaging in a currency devaluation.

In a race to the bottom, all of the fiat currencies will eventually have nowhere to go but into the incinerator, along with all other historical fiat currencies.

The universe of fiat currency that we currently live in really will have become a burnt-out cinder.

I warn you that politicians of both parties [the Republicans and the Democrats] will oppose the restoration of gold, although they may outwardly seemingly favour it. Also, those elements here and abroad who are getting rich from the continued American inflation will oppose a return to sound money. You must be prepared to meet their opposition intelligently and vigourously. They have had 15 years of unbroken victory.

But, unless you are willing to surrender your children and your country to galloping inflation, war and slavery, then this cause demands your support. For if human liberty is to survive in America, we must win the battle to restore honest money.

Howard Buffett, 1948

[The Scribd document below contains the original 1948 article written by Howard Buffett, which is referred to several times in the recorded interview above.]

Howard Buffett

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