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Time to Get Out of the Pot?


Those of you following websites with a similar perspective might be familiar with the story of the boiling frog. It is assumed that if a frog is placed in boiling water it will jump out. However, if it is placed in cold water, and the heat slowly increased, so it gradually reaches the boiling point, the frog doesn't notice anything and slowly dies.


I would guess that most of our readers have at least our heads and hopefully vital organs out of the pot by this point. The water has been very hot for quite a long time and is finally approaching the boiling point. How do I know? Well, just look at the signs:


Here's Jim Sinclair with his perspective on the ongoing financial war. With the US kicking Iran and potentially India out of the SWIFT system, the first major shot has been fired. BRIC countries, or the East, have been pushed around by the West for a long time now, and they have waited quite a long time for the West to slowly bankrupt itself. The West doesn't have too many options left at this point and is resorting to more force, as should be expected. Because the East has been steadily moving away from using the USD for trade settlement and as a reserve, the West is looking to punish the revolutionaries. This is, in large part, what the conflicts in Iraq, Lybia, Syria, and now Iran are about. The problem is, locking countries out of SWIFT does not increase the use of the USD, and it divides the West and the East even more. Be prepared for more countries to join the East as the West tries to protect demand for the USD via more and more force.


Decreasing demand for the USD, combined with major increases in currency supply since 2008, inevitably lead to an increase in prices of real goods. Normally, after a period of very heavy price inflation comes a period of hyperinflation. This is the point where the currency of choice loses value super fast. Usually, it happens because a large chunk of the demand disappears, because a few big players, or a large number of small players have decided that the currency no longer has enough value to justify its use. In other words, hyperinflation happens because the majority wakes up and stops using the currency, or because a few big players stop using the currency. The Western majority at this point still has no clue what is happening. Thus, it is more likely that this hyperinflation will be sparked by some big players such as Iran, China, etc. Maybe this is why the US is forcibly propping demand for the USD as much as it is? So it can kick the inevitable bust just a little bit further?


If you want some signs from home, just have a look at the latest executive order that was passed. It basically allows the US to seize all agricultural produce and natural resources during peace-time. During war-time this has been legal for quite a while, but during peace-time, not until now. Maybe there won't be a real WW III? Maybe The real war is between the people and their government? FOFOA sees this as preparation by the government for hyperinflation. This executive order is about riot control and securing food and natural resources for the coming shortages of food and fuel. It's not actually a shortage, it's just that very few will actually be able to afford food and fuel. If hyperinflation means you lose your job, and lose your savings, how do you pay for food and fuel? Riot anyone?


There are still a few frogs that are thinking about getting out of the pot. The bad news is that the hour is getting late. The good news is that there is still a bit of time left. Where to jump to?


Money has three functions; medium of exchange, store of value and unit-of-account. Paper currency is great as a medium of exchange but a terrible unit of account, and absolutely horrible store of value. Remember Voltaire: "Paper money eventually returns to its intrinsic value -- zero." Why use something that could be worth nothing, as a unit-of-account or let alone a store of value? 


The really good news is that there always have been other options to choose from. Nobody has to keep their savings in money substitutes such as the USD or other paper currencies. Actually, that is probably one of the worst things you could do. Savings should be kept in things which keep their value and the best stores of value throughout millenia have been precious metals.


The really awesome news is you do not even have to own gold to benefit from it. Gold is a much better unit-of-account precisely because it keeps its value. Here are two posts from Golden Markets which provide a bit more background on this way of thinking. Golden Markets is a website that provides market analysis in ounces of gold, instead of depreciating paper currency.


If you value your savings at all, it might be a good idea to educate yourself a little more about this perspective. It just might be the difference between losing everything and protecting what you already have.


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