Economics

All this is stuff is quite complex. So, to aid understanding, I have broken down into smaller, more manageable parts – hence the many short videos.

All these various parts fit together much like pieces in a jigsaw puzzle. The pieces interlink to form a whole.

The parts are presented piece by piece and hopefully, at the end, you’ll be able to put them together in your mind’s eye and see the bigger picture.

Bear in mind, that this is a very simplified form. In reality, it’s a hugely complex topic – more like one of those giant, thousand piece jigsaw puzzles for adults.

Wise up and rise up.

Inflation is defined, in classical economics, as an increase in the money supply – basically, to put it in everyday terms, the Government, or should I say the Central Banks, print money.

But we must bear in mind that this increase in the money supply needs to be beyond the rate of growth of an economy – the real GDP figure. So, if the economy grows at a rate of 2% and the money supply grows at a rate of 5%, you will get an inflation rate of 3%.

A good analogy to use when thinking about inflation is whiskey. Some people like to drink whisky neat. Some people like to drink whisky with ice. Some people like to drink whisky with water. If you add water, the whiskey becomes somewhat diluted – it’s not quite so strong. If you add too much water, the taste of the whiskey is lessened to some extent and, more importantly perhaps, it loses some of its potency in respect of each mouthful taken. Analogies are rarely perfect, but I hope you get the idea.

The same is true of a currency – it can become diluted – it can lose its potency. Although different terms are used.

When it comes to a currency, instead of saying, adding water, the phase used is, “an increase in the money supply”. And, for “dilute”, the terms used are, either “devalue”, or “debase”. For potency, the term used is, “purchasing power”. Purchasing power is the ability of a currency to pay for goods and services.

Increasing the money supply is not good for a currency. It devalues, or debases, the currency. A devaluation is a loss of value – the currency loses its purchasing power.

At this juncture, I should say that people tend to think of inflation as being rising prices. So in an inflationary environment, people might complain about the rising prices; grumbling that things in the shops are getting more expensive.

But, I think that it’s a mistake to think of inflation in this way. Rising prices are the end result of inflation - the increase in the money supply. The rising prices that we see, in say a supermarket, are the fruits of the tree – the apples on an apple tree. I refer you to an earlier video I made, entitled, “Inflation – rising prices” to get more of an understanding on this matter.

I would suggest that a better way to think about inflation, is to see inflation in terms of purchasing power. So, when the purchasing power of a currency decreases, the ability of that currency to pay for goods and services decreases.

Everything is relative. In the event of a devaluation, essentially what has happened is that the currency has lost some of its purchasing power in relation to the product.

So, it’s best not to think of the product rising in price, or getting more expensive. Switch your thinking and instead, think of the currency losing some of its purchasing power in relation to the product.

Perhaps it might help if I refer you to the Rubin’s Vase optical illusion with the vase and two faces. I’m sure you’ve all seen this. At one point you can see a vase. And then you can swi

In this video I will look at Inflation, but with a particular focus on rising prices.

“Isn’t inflation rising prices?”, someone might ask. To this question, I would have to say “No”.

People certainly tend to think of inflation as being rising prices. So, in an inflationary environment, people will probably complain about the prices of products going up. They might grumble to themselves, or to people around them, saying that things in the shops are getting a lot more expensive. And they then might say, something like “Inflation is bad”.

But, in my opinion, it’s a mistake to think of inflation in this way. Inflation is not rising prices. The terms shouldn’t be used interchangeably.

Rising prices are the end result of inflation.

Inflation is defined, in classical economics, as an increase in the money supply – basically, to put it in everyday terms, the Government, or should I say the Central Banks, print money.

I think an analogy might help to explain the matter.

Imagine we’re in the countryside somewhere. It’s summertime, early in the morning – the dawn of a new day, the sun has only recently just risen - and we’re all gathered in a field. The weather is fabulous, there’s a slight breeze and there are only a few clouds in the sky. Conditions are perfect for a trip in a hot air balloon. The balloon itself is lying flat on the ground, deflated and spread out. One of the hot air balloon enthusiasts climbs into the basket and he fires up the gas burner. A number of people have to help fill the balloon with hot air. It takes a while, but eventually the hot air balloon gets filled up. The whole thing moves into a more vertical position and is ready for take off. A couple more people then get into the basket. A few more blasts of the burner and it’s airborne. They are up and away. In a few minutes, it has risen quite high and is travelling wherever the wind takes it.

The people left in the field watch on. Maybe one of them remarks to another … “Look how high it is.”

What causes the hot air balloon to rise? The answer is … the hot air inside the balloon. Hot air wants to rise above the cold air, thereby causing the balloon to rise.

The balloon can be regarded as being equivalent to the economy. The people in the balloon’s basket can be regarded as being equivalent to the Government or Central Bankers. The heat from the burner can be regarded as being equivalent to the mechanism by which money is created. And heating up the air inside the balloon can be regarded as being equivalent to inflation and the increase the money supply. The height that the balloon reaches can be regarded as equivalent to the rise in prices as seen in the supermarket.

We have to be clear that it’s the hot air inside the balloon that gives rise to (pardon the pun) to balloon being so high. It’s the hot air that is the cause. A distinction must then be drawn between the hot air inside the balloon and the height of the balloon. These two phenomena are definitely not t

Inflation is regarded by some as a stealth tax.

How so?

Imagine you are about reach the age of retirement. You have worked all your life and have a good amount of money in your savings account. Let’s say 100,000 Dollars. Imagine then that you suffer a strange illness and go into a coma. The coma lasts for a year. During that time the economy suffers a sudden, massive bout of inflation. Let’s say the inflation rate is 50%. When you come round from your coma and resume your life, you go into your bank and discover that the 100,000 Dollars is still there as you left it, but its purchasing power has been cut in half. So in effect it’s really only worth 50,000 Dollars in real terms.

This is admittedly an absurd scenario, but illustrates the pernicious effects of inflation.

But why is it regarded as a tax? Well, because it’s the government that is in control of the money supply – or I should say to be correct, it’s the Central Banks. They are in charge.

Wise up and rise up.

Hyperinflation helps illustrate the pernicious effects of inflation better than the scenario I set forth in my previous video. The adverse affects of inflation are brought into stark relief when we look at what happens in a hyperinflationary scenario.

What is the difference between inflation and hyperinflation? In some respects, not a lot.

The only real difference between inflation and hyperinflation is “velocity of money”. This might sound complicated, but it isn’t. Velocity of money describes the rate at which money moves through society – how often it changes hands.

In a hyperinflationary scenario, people spend the currency they have earned as fast as they can because they are concerned that the currency is losing its value – so better to spend it as soon as possible. So oftentimes, people get their wages and rush out to spend them as soon as they can, buying whatever is available in order to convert the devaluing currency to some kind of hard asset.

Under such a scenario, your salary becomes worth less and less each month / week / day / hour. And if prices are doubling every day, (or rather, if the purchasing power of the currency is dropping by a half every day) what is the point in working?

Unfortunately, any savings sitting in a bank account become worth less and can get completely wiped out. Currency does nothing in the bank, but lose value.

So, the movement is from worth less (worth less and less and less) to worthless i.e. worth nothing, nothing at all.

And it’s a vicious circle. People realise that their money is becoming worth less and less each day so they spend it as fast as they can.

The velocity of money speeds up – getting faster and faster. It’s a negative feedback loop. That only ends in one way - badly. Very, very badly.

Mike Maloney on YouTube does a very good job of showing this operation. In fact, I would highly recommend you watching his whole series “the Hidden Secrets of Money”. It will prepare for what is to come.

The currency - fiat currency - is not a store of value like real money is. I shall go into details about all this in another video.

The Deutsche-Mark in the Weimar Republic is an often cited example of a currency which has undergone hyperinflation. In 1923 the inflation rate was 30,000 % - prices of products doubled every 4 days.

What does this mean? What happens in a real-world, hyper-inflationary scenario?

There is the typical of examples of people having a wheelbarrow of money to buy goods, or the cost of bread being a month’s wages. But these are not made up – these are not the inventions of my imagination. These are real world situations. They actually happened.

There are a couple of academics (Hanke-Krus) who have studied this phenomena and produced a set criteria for calculating the inflation rate, or rather the rate of hyperinflation. They have produced a hyperinflation table – showing the time for prices to double.
N.B. They say “prices doubling” where as they should say “currency de

The Federal Reserve, or the FED as it is commonly referred to as, is the Central Bank of America. It was established over a century ago on December 23rd 1913.

It might come as a surprise to some to learn that FED is not a government institution. It’s actually a private corporation – a privately owned company. So, it’s not really Federal. Neither does it have any actual reserves. And it’s not even called a bank. In fact, it’s called a system.

In historical terms, the FED is the third US Central bank to have existed. Before the FED, there was the First Bank of the United States (1791 to 1811) and also the Second Bank of America (1816 to 1836).

With regard to the First Bank of the United States, it came into being on February 25th 1791 and was chartered for a term of twenty years. As is common to all central banks, their main task was to lend currency to government. But they did not set monetary policy. Alexander Hamilton, the First Secretary of the Treasury at the time, made the claim that a central bank was necessary to stabilize banking and improve the nation’s credit. The banks charter expired in 1811. The issue around this is rather involved, so I won’t go into it here. But it’s interesting, so I would encourage people learn about it.

Second Bank of America was chartered in February 1816. It was, as before, a private corporation with public duties. Again, it was claimed that its purpose was to ensure a stable currency.

Andrew Jackson wasn’t of this opinion. In 1828, he ran for the office of President promising to end the bank’s charter. He became President and continued his attacks on the bank. After a struggle, which came to be known as the “Bank War”, he managed to get the charter revoked. This is also very interesting, so I would therefore encourage people learn about it. As a side note, Andrew Jackson went on to become the only US President to pay off the National Debt.

Why is all this important? Well, I would argue that history can teach us a thing or two about our situation today.

To share a personal anecdote, in 2011 I came across a documentary on YouTube about the Federal Reserve and the history of Central Banking in America. The information it contained made my head spin. When I saw it, I began to appreciate the enormous implications. The information took me a few days to absorb. But once I had assimilated it, it altered the course of my life – no word of a lie.

I also wish to point out that there is a reason why President Trump had a picture of Andrew Jackson hanging in his office when he was in the White House.

Why have I concentrated on Central Banking in the US? Well, I believe that it represents an easy way of understanding a rather complex topic – it’s a useful key to unlocking a whole host of other interesting things that affect us all. And also, the FED is the most important Central Bank because the US is, for the time being at any rate, the most powerful country in the world.

For an in-depth look at how the FED cam

Central Banking is a complete con.

That’s quite a claim you might say. And I would have to agree. It’s certainly a bold statement and it’s probably a controversial one also. But let me see if I can’t back up this claim with some sound reasoning.

First, let’s look at the business of government. What is it that governments should be doing? I shall try and outline this as best I can. I’m going to speak in general terms. This is not country specific, but can be broadly applied to the different countries of the world, making adjustments where necessary.

Governments are supposed to work on behalf of the populace making sure that the economy is doing well. Managing the economic side of things is one of their main tasks. And it’s a very important task at that. Because if they don’t manage the nation’s economy properly, then all other things go awry. Sound familiar? Anyway, let’s not get side-tracked.

They also manage other things such as defence, welfare, the health care systems, infrastructure, policing etc.

One a regular basis, all this activity is costed and put forward in budget proposals.

But the big question is, how do they pay for all these things? Well, in certain respects, it could be argued that they don’t. The costs are passed on - from the government to the ordinary person. Basically, the people pay for it in the form of taxation. In this operation, the burden of cost is successfully transferred from governments the people. There are obvious ramifications of this such as responsibility and accountability which I won’t go into here. That is perhaps a topic for another discussion.

This taxation operation might be more obvious by looking at what happened in bygone days. If the king of a country wanted to go to war, he would have to raise an army. But first, he would have to raise some money, because armies are expensive. So, in order to pay for the army, he would get the money by means of taxation. More often than not, taxes would be raised. And I dare say to the disgruntlement of the common folk of the country. Not only did they have to fight in the kings’ wars, they had to pay for them as well. This perhaps should also be a good topic for a discourse.

Something similar still happens nowadays. If the governments want to pay for a particular project, they put forward a proposal and then the government pledges to fund the project via taxation. All well and good so far, you might say. Nothing untoward as yet.

Where does the Central Bank come in to all this, you might ask.

Knowing this is how governments operate, Central Banks spied a way of making money. What the Central Banks did was to cleverly interpose themselves as a third party in this transaction. They made sure that the governments borrow from them. So, rather than the government borrowing money from the future and raising funds that way, the Central Bank lends them the money. And they charged them interest to boot for the pleasure of this service.

I don’t know if I have explain

I should have mentioned in my previous video that people of a bygone age would have known about all this kind of thing. They would have a good understanding of the how an economy operates.

To evidence this, Andrew Jackson wouldn’t have won the Presidency in 1829 had it not been for the fact that people were more aware of matters relating to Economics.

We need to make this common knowledge again. After all, it’s in our interests to do so. So, I would encourage you to educate yourself and then educate others.

I wish to draw your attention to a quote Andrew Jackson made with regard to the Second Bank of America … “You are a den of vipers and thieves. I intend to rout you out, and by Eternal God, I will rout you out !” Perhaps we need to bear this in mind with regard to the situation we find ourselves in presently. Maybe it could be made into some kind of slogan for us to stand behind it.

The other thing that I forgot to mention was that all this stuff is “hidden in plain sight”. Naturally the FED et all have not wanted to draw attention to their operation for obvious reasons – but the information is readily available for people to find if they wanted.

Notice also that the governments are complicit in this. It is not a subject which is broached, or brought up for discussion. The only politicians I know of who have done so are Ron Paul and his son, Rand Paul in the US.

And the MSM are also complicit. They don’t report on this stuff. They do not shine the light on this when they should.

The old adage holds true – “If you are not part of the solution, then you are part of the problem.”

Wise up and rise up.

What is money?

There are seven characteristics of money :-
1. Medium of exchange - used as an intermediary in trade.
2. Unit of Account – standardised, easily counted units.
3. Fungible – because of standardisation, each unit can be easily substituted by another unit (if the units are of equal value).
4. Divisible – units it can be easily divided into smaller units.
5. Durable – it’s long lived.
6. Portable – it can be easily carried.
7. Store of value – it holds value over time – it retains purchasing power.

The single most important characteristic of money is its store of value.

This is best explained by means of an example. Imagine that I have a job in a factory. I work 35 hours per week. I get 2000 Dollars per month. At the end of the month, I get a salary. Let’s assume I get paid directly by the company in the form a stack of notes in an envelope, rather than a deposit in my bank account. I use that money to pay my mortgage, to pay my bills, to pay for various other services, or to buy products in shops or online. The payment for my labour is stored in the money. So essentially, this store of value enables me to distribute the value (of my labour) as is necessary, or as I wish. I could even keep hold of it, put it away somewhere for safe-keeping for use sometime in the future when I need it. I could put it in a saving account in a bank. In this particular instance, it’s very important that it holds its value over time.

What is the purpose of money?
The short answer is that, when it comes to trade, it’s better than bartering. Money provides a ready and reliable means of exchange. One of its advantages is, as seen in the list, it’s portable - after all it’s easier to carry around some notes and coins than a cow.

Also, the problem with bartering is that you might go to a market and say have a bushel of wheat and you want to get a chicken. There might be a farmer in the market with the chicken however, he doesn’t want a bushel of wheat. Instead, he wants a bag of corn. There’s a mismatch which hampers trade. The exchange then doesn’t happen. Being a medium of exchange, money overcomes this impediment. This is a very important function which allows trade to take place.
Divisibility is also important because the units can go to make up whatever amount is required. And also because of the standardisation, the units can be relied upon. Trust is an important aspect to all this.

Wise up and rise up.

Most people, myself included, use the terms “money” and “currency” more or less interchangeably, but technically they are different, and so, shouldn’t really be confused.

The most important difference between money and currency has to do with store of value – money has an intrinsic value. It has a worth in it and of itself.

Precious metals such as gold and silver are considered money because they have the aforementioned store of value. Gold and Silver are referred to as monetary metals. They have been used as the medium of exchange and a store of value for millennia - through the ages and also across different cultures. This persistence over such long periods of time and also the cross-cultural aspect are points which are, to my mind, very telling.

Currencies, on the other hand, have all the characteristics of money, but crucially, they do not have the all-important store of value. This is their fatal flaw.

“The Gold Standard” is the name given to the backing of a currency with Gold.

With a Gold Standard, a currency can become money – or rather, I should say, a currency can assume the status of money. It will never be money because it lacks the store of value.

The expression “as good as gold” has often been used in respect of currencies because currencies which are backed by gold can be used in trade to buy products as if they were gold.

Backing a currency with gold gives the currency a value than it would otherwise not have. After all, currencies don’t have any real, intrinsic value. In and of themselves, they aren’t worth much. They are just digits on a computer screen, or paper - pretty, printed pieces of paper. Or with regard to coins, shining bits of coloured metal.

While we’re talking about such things, I should mention, “paper money”, the physical form of cash. “Paper money” - or “paper currency” as it should be properly called - isn’t a new phenomenon. Bank notes, or Promissory notes - have been around an awfully long time - since the Han Dynasty in China circa 118 BC. But the 17th Century is time period when paper currency began to really began to become predominant in Europe – more’s the pity.

Moving on …

So to recap … Gold and Silver are considered as being money, real money.

Currencies are not money. They might masquerade as money, but the truth is they’re not money and never will be. Currencies are “fake money”, “false money”, “phoney money”, “funny money”, or whatever terms you want to use. They pretend to be money, but they aren’t actually money.

Even with a Gold Standard, a currency is still only a currency. It’s not real money and it will never be real money. And it shouldn’t be considered as real money.

I realise that I’ve laboured the point a little, but the difference between money and currency is incredibly important. It might seem like a trivial thing but, I can assure you, it isn’t. It most certainly is not inconsequential.

Why is this so important (you might be asking yourself)? Well, because unfortuna

The properties of Gold are as follows : -
• Chemical element Au
• Atomic number 97
• One of the least reactive substances on earth.
• It doesn’t corrode (like iron does). And it’s resistant to most acids.
• A relatively rare element. Scarcity often strongly correlates with high value.

It has been used as money for thousands of years. The first known coins containing gold were used in Lydia, circa 600BC.

Gold has also been seen as a store of value through the ages and across different cultures. This persistence over such long periods of time is telling.

Lastly it looks mighty fine in jewellery, or even in those big, old gold bars, or those shiny sovereigns.

Wise up and rise up.

The Gold Standard is the name given to the backing of a currency with Gold.
Sir Issac Newton, of gravity and falling apple fame, is credited with having come up with the notion of a Gold Standard circa 1717. It serves humans civilisations well for 200 years.

Why has Gold been used to back currencies? Well, because gold has an intrinsic value and it maintains this value over time. With a Gold Standard, a currency can become money – or rather I should say a currency can assume the status of real money. A currency will only ever be a currency. It will never be real money.

Backing a currency with gold gives the currency a value than it would otherwise not have. After all, currencies don’t have any real intrinsic value. In and of themselves, they aren’t worth much. They are just paper - pretty, printed pieces of paper. Or with regard to coins, shining bits of metal. (Have you noticed that coins are coloured silver and gold? This is done deliberately - to fool people into thinking that they are real money.)

There is another very important facet of the Gold Standard which is often overlooked. Having a Gold Standard demands that governments are fiscally prudent. This basically means that the governments have to “balance the books” and budget properly.

It’s a restraining mechanism, serving as a curb against governments building up debt. With a Gold Standard they can not so easily increase the money supply. They can’t just print money as they desire.

Why not? Because Gold is a scarce resource and it’s hard to come by. With the Gold Standard the money supply usually increases in line with productivity. Inflation is therefore necessarily limited.
The converse is also true obviously. Without a Gold Standard, governments have no real restraint on their spending.

Wise up and rise up.

Broadly speaking, there are two main schools of thought in Economics.

The Austrian School advocates free markets and fiscal prudence.

The Keynesians, on the other hand, don’t care so much about fiscal prudence. They support government spending - advocating a government spend its way out of a recession for example. The fancy term is “deficit spending” and they argue that it kicks starts a sluggish economy. Put simply, they like to spend, spend, spend.

And they don’t much like the Gold Standard either. The Economist Milton Friedman referred to the Gold Standard as “the golden handcuffs”. This is fairly telling in my mind.

Can you guess which school is dominant nowadays?

Wise up and rise up.

In this video, I’m going to be talking about “Fiat currencies”.

There are really only three things that you need to know when it comes to “Fiat currencies”.

1. Government decree
2. Unbacked
3. Limited lifespans

So, let’s look at these three things in more detail, point by point.

1. Government decree
A “Fiat currency” is a currency that is brought into being by dint of a government decree. So basically the government passes a law which makes that currency legal tender in that country. It can then be used to buy goods and services etc. According to Investopedia, “the term fiat is a Latin word that is often translated as “it shall be”, or “let it be done”.”

2. Unbacked
A currency that is not backed, or not supported by anything, is called a “Fiat currency”.

Most people, myself included, use the terms “money” and “currency” more or less interchangeably, but technically they are different and so shouldn’t really be confused. I refer you to a video I did entitled, “Money v Currency” to get a better understanding of this topic.

Currencies have all the characteristics of money, but crucially, they don’t have the all-important store of value. I refer you to a video I did entitled, “Money” to get a better understanding of this topic. Currencies don’t have any intrinsic value, in and of themselves. Because of this they need to be backed by something, something that does have value. The value of a fiat currency is therefore then derived from the thing backing it.

A currency can be backed by Gold. This has been the most common way of backing a currency. This is known as the “Gold Standard”. I refer you to a video I did entitled, “Gold Standard” to get a better understanding of this topic.

3. Limited lifespans – “the End is Nigh”
Fiat currencies tend to have a limited life span - lasting only on average, about 50 years.

Be advised, in history, all fiat currencies have gone to zero – every single fiat currency has become absolutely worthless.

Why? Well, because they are all subject to hyperinflation. I refer you to a video I did entitled, “Inflation v Hyperinflation” to get a better understanding of this topic.

Why are they so prone to hyperinflation? Because of government overspending. With no restraint on spending, governments tend print all money that they desire and this money printing consequently devalues the currency. With a Gold Standard, this doesn’t happen. It acts as a restraining mechanism.

What we are dealing with here is government mismanagement or, to put it another way, misrule. To put it another way, it’s corruption in Government. Sound familiar?

As far as I’m aware, all currencies of the world are “Fiat currencies”. And this includes “King Dollar”. Even though the Dollar presently has the World Reserve Status, it’s still a fiat currency.
Prior to 1971, it was backed by Gold. But then in 1971, President Richard Nixon removed the Gold Standard. This is known as the “Nixon Shock”. I refer you to a video I did entitled, “Ni

This video is a follow on to the other videos I’ve done on Inflation, but this time, I’m going to focus on the role of the Central Banks.

The FED, the Central Bank of the US, had said earlier in 2021 that inflation was “transitory”. More recently, they have disavowed this position. But, whatever they might say on the issue, they are not to be trusted. I can assure you, that they are not on working in the best interests of the people. They are not our allies. They are, in fact, our enemies. They are simply engaged in “perception management” and more deception. You might want to look at the videos I’ve done on Central Banking to understand what I mean here.

Gregory Mannarino (Traders Choice) on YouTube often says that the FED is “an inflation creation machine”. And, I would have to agree with him.

Inflation is defined, in classical economics, as an increase in the money supply – to put this in everyday terms, it’s money printing.

Using this classical definition, the FED, along with the other major Central Banks of the world, such as, the Bank of England the (BoE), the European Central Bank (the ECB), the Bank of Japan and the Bank of China, and the rest … all are responsible for the inflation.

Why? Well, because the Central Banks are in charge of monetary policy. They control the money supply.

What about the Governments you might ask? Governments act as managers, setting budgets and spending money – that kind of thing. They approach the Central Banks to get money that they require. An easy way to think of the situation, is to imagine a traditional couple back in the 1950s. The Central Banks are the husbands. The Governments are the wives. The wives are in charge of the daily management of the household. The housewives look after the children, prepare meals, do the house-keeping and budgeting, go out and do the shopping, buy groceries etc. The husband is in charge of the money side of things. His role is to bring the money in.

The Central Banks and the Governments are then partners. They work in partnership with each other, acting in accord with the different roles that are assigned to them. The Governments then, are as responsible as the Central Banks in creating inflation.

The way money is actually created is not straightforward. In fact, it’s rather complicated, so I’m not going to explain it here … besides, Mike Maloney on YouTube does a very good job of showing this operation. I would highly recommend you watching his whole series “the Hidden Secrets of Money”.

Anyway, let’s return to the FED.

Ever since the Financial crisis of 2007 / 2008, the FED has been engaged in fiscal stimulus – an expansionist monetary policy called Quantative Easing (QE). It’s a large-scale asset purchasing programme. But basically, all you need to know is that it’s money printing. Since the onset of the Pandemic, money printing has increased still further. In 2020, the FED increased the money supply by 30%. This is truly incredible. Indeed, it beggars’ b

A little over 50 years ago, on 15th August 1971 President Nixon appeared on TV in the US and announced to the nation that he was going to suspend the convertibility of Dollars to Gold. Basically, this move ended the Gold Standard - stopping the exchange of Dollars for Gold.
“I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interest of monetary stability and in the best interests of the United States.”

He said it was a temporary measure, but it has been in place ever since then.

Does this statement sound familiar to you? Is inflation really “temporary”? Anyway …

Why did Nixon do this? The US had been losing a substantial amount of its gold reserves due to balance of trade issues. So, the Gold reserves were being depleted. Fort Knox was being emptied.

This alone shows how important Gold is, does it not?

As a side note … the US gold reserves had gone up considerably due to the confiscation of gold from US citizens! But I digress …

The Bretton Woods System was failing. (I should perhaps do a video on this also.)

The Nixon Shock rendered the Gold Standard (de facto) inoperative and we have been living with the consequences ever since.

Wise up and rise up.

At this juncture, I should say that the Dollar is the World Reserve Currency. It’s “King Dollar”.

The crowning of King Dollar officially took place towards the end of WWII with the Bretton Woods System (on which, more later). But in reality, it was a process that was taking place early on in the 20th Century as the British Empire was waning. And traces of this can be discerned stretching back into the 19th Century.

Prior to the Dollar, Sterling held this title and did so throughout the 19th Century.

Prior to the UK, it was France who had the WRC position.

If Spiderman were to be put in a climbing competition, what would happen? He would probably win. Or at least he should do. The result should be a forgone conclusion. Spiderman was an ordinary human called Peter Parker until he was bitten by a radioactive spider and then came to get superpowers. His superpowers put him above all others.

This situation is not dissimilar to a country that has the WRC. The WRC gives a currency superpowers - superpowers that are hard to detect by first appearances.

The WRC is important because it artificially raises the status of the currency above all others. Relative to other currencies, it automatically ranks the highest. It ensures that the currency of that country is preeminent in the world.

How does the WRC confer benefits?
The answer has to do with international trade. International trade is conducted in the WRC. Right now, that’s the Dollar. In order to trade internationally, all countries are obliged to hold Dollars in their reserves. 60 % of foreign exchange reserves are held in US Dollars. China holds the highest reserves of the US Dollar.

Moreover, all international contracts are written in Dollar terms.

Basically, the WRC status (artificially) increases the demand for the Dollar and this therefore, consequently (artificially) increases its value - where otherwise the value of the Dollar (in relation to other currencies) would be lower.

What benefits does it bring?
It confers incredible (macro economic) benefits to the country that holds it. But the WRC status doesn’t just ensure dominance in the financial world. The effects are widespread and far-reaching.

It has allowed the citizens of the USA to have a higher standard of living than the rest of us. A strong dollar means greater purchasing power.

By way of example, an American can travel across the border into Mexico on holiday and live very well because strength of the $ compared to the Mexican Peso. Conversely, a Mexican travelling to the America would find everything in the US very expensive.

The WRC has also allowed the USA to live beyond its means. It’s like having free use of a Platinum Credit card for the entire country.

The WRC is one of the key elements that has enabled the US to dominate not just all the other currencies of the world, but world affairs in general. Remember, … money is a tool.

Wise up and rise up.

The Bretton Woods System which was established in 1945 was the formal agreement that gave the Dollar the WRC status. All other major currencies were officially then linked to the Dollar.
It also established a Gold Standard. The Dollars could be exchanged at a fixed rate of $35 per once of gold. (At that time, the US owned half of the world’s gold reserves.)

Essentially, given all other major currencies were linked to the Dollar, it meant that all currencies, not just the Dollar, were backed by gold.

The aim of the Bretton Woods System was to ensure exchange rate stability, prevent devaluations and promote economic growth. Basically it made the US Dollar the anchor of the world economy.

In the years immediately following WWII the Bretton Woods System worked reasonably well.
France, however called the System “America’s exorbitant privilege”. Why? Because the French (and other nations) thought that they were supporting American living standards. They complained that is was an asymmetric financial system. And they were right.

It didn’t, after all, cost the US much to print Dollars – only a few cents per Dollar bill. So the US was getting real products (goods of real value) while the other countries of the world were getting cheaply made paper currency in return.

The then President of France, Charles de Gaulle announced that he was going to exchange the reserves of Dollars France had accumulated for Gold at the official exchange rate. And France went on to redeem $191 million.

Other countries then began to demand redemption of their Dollars for Gold. Switzerland had redeemed $50 million in July.

Earlier in the year, in May, West Germany left the Bretton Woods System.

Wise up and rise up.

In 1973 Henry Kissinger went over to Saudi Arabia (KSA) and did a deal with the King – basically getting KSA (and other OPEC member countries) to use Dollars for their oil trades. This was called the Petro-Dollar System.

The US set up the Petro-Dollar System as a way of off-setting the effects of the ending of the Gold Standard. In a way, it replaced the Gold Standard.

Oil is the very lifeblood of the world economy. It’s the energy that powers the system. Without oil, the whole system would grind to a halt. The US administration realised that if they could link the dollar to oil, then the could secure the value of the $.

This is one of the reasons oil is called “Black Gold”.

The Petro-Dollar System is in its death throws. Russia and China are asserting their influence in KSA. This has gigantic geo-political implications. There is a de-Dollarisation in oil trades taking place.
China just recently announced 2 massive oil finds in China.

For an in depth look at how the Petro-Dollar System is dying (and more else besides) I would highly recommend you looking at a great series on YouTube by Mike Maloney called “the Hidden Secrets of Money”.

If you want to get an idea of the importance of KSA on the world stage and the Petro-Dollar System, then I would highly recommend you looking at a short video on YouTube by Jack Chapple called “The largest Empire in the world today … and no one knows about it”.

Wise up and rise up.

In this video and the next, I shall be taking a slight detour away from “the jigsaw puzzle” presentations in order to discuss the financial crisis of 2007 / 2008 and the possibility of there being another financial crisis in the near future.

For me, the best way to describe the Financial crisis of 2007 / 2008 is by way of an analogy. The financial system suffered a heart attack and was rushed to hospital. It went into the emergency room and was treated. However, although the situation looked dire, it didn’t die. The doctors and nurses saved its life.

Heart attacks happen for a reason. The crisis was caused by malpractice by the banks in the sub-prime mortgage market and also by the creation of the new financial instruments - mortgaged-backed securities, credit default swaps and Collateral Debt Obligations.

The trigger which set off the crisis was high delinquency rates (repayment defaults on the mortgages) in the sub-prime sector – this basically burst the sub-prime bubble.

In the US, it led to the nationalization of Fannie Mae and Freddie Mac who had underwritten much of the bad debts. It also caused the collapse of Lehman Brothers.

In response to the unfolding credit crisis, Paulson (the then Secretary of the US Treasury) and Ben Bernanke (the then FED chairman) got together and agreed the best way to restore confidence and unfreeze capital markets was to provide direct cash injections from the government into financial institutions. To ensure liquidity in the banking system, the big banks were “forced” to accept $700 Billion. It was an unprecedented move.

But this was only one aspect of Paulson’s financial rescue plan. There were bailouts of some financial institutions including AIG ($85 billion).

The plan worked in that it stopped other banks from collapsing, but it did not bring as much liquidity into the system as hoped for. The FED therefore engaged in fiscal stimulus – an expansionist monetary policy called Quantative Easing (QE). It’s a large scale asset purchasing programme.

One of the outcomes of the crisis was the creation of Systemically Important Financial Institutions, or SIFIs as they are known. They are the “Too big to fail banks”.

All this might not seem to be a bad thing, but on closer inspection it is not good at all. Why? Because there are less obvious ramifications to the government having stepped in as the saviours. By bailing out the big banks, the governments underwrote risk. By doing this they, created what is known as “Moral Hazard”.

To explain what this means … this basically told to the banksters that if they made some risky investments and subsequently failed they would get government support. So, no matter what they did, the government would save them - the government “had their back”. They wouldn’t suffer the consequences of their bad decisions. To put it another way, they socialised risk and privatised profit. They gamble and we, the people, pay the price.

This is a very abridged version of what hap

The problems from the financial crisis of 2008 were not really fixed. Indeed, it could easily be argued that a whole host of other problems were created.

It looks likely that another financial crisis is going to occur and this may be sooner rather than later. Truth be told, the economy has been in the hospital ever since 2008 and another heart attack is in the offing. What is more, this crisis will more than likely be of vastly greater proportions than the previous one. And this time, it could kill the financial system outright.

I should point out that there is a difference between the “Financial System” (which is comprised of a collections of various financial systems) and the underlying economy, but perhaps this is a topic for another video.

The “recovery” since the crash of 2008 has been something of a fabrication (one might even say it’s an outright lie) made up by the powers that be (the governments, the central banks, the ECB, IMF, the FED, the main stream media etc) in order to control the narrative – perception management is the name of the game.

Quantative Easing :- QE is one of the two key supports given to the financial system while it has been in the ICU. Basically, returning to our analogy, the financial system is being given blood transfusions to keep it alive. We must bear also in mind that QE is just money printing and we know the perils of that. I refer you to my previous video on Inflation.

GDP : - At best growth could be described as weak. How can growth in GDP of around 2% be regarded as anything but weak? GDP is put forward as an indicator of economic activity in a society. Just as with a thermometer used on a sick individual, there is a narrow range where the person is deemed well. When it goes outside of that range there is cause for concern. It’s been at the low end of the scale for an awfully long time.

The Stock market : - Yes stock markets are high… but stock markets are just a single part of the financial system. They are not the be all and end all of an economy - despite what the main stream media (MSM) would have us believe. So don’t be fooled by their propaganda.

It’s worth pointing out that low interest rates have provided cheap money which has caused asset prices to rise. Bubbles have been blown up all over the place.

Another point to make is that in recent times CEOs of companies have instigated policies of buying back shares in their own companies which has in turn inflated the prices of their company stocks. This policy artificially boosts stock price.

In the US, there is the “Plunge Protection Team” which is an agency of the Treasury. They step in when there is a dramatic downturn in the stock market. This certainly doesn’t seem to something one might associate with free market Capitalism, does it? One could even argue that capitalism has given way to a state-run centrally managed market. And you could call that communism.

And, as Gregory Mannerino occasionally points out, the FED has a trading des