End of Fiat Currency?

I always start out this weekly letter with a quick and dirty “risk-on” or “risk-off” appraisal, which is in many ways a disservice because it draws attention away from the more important, longer-term dangers of what is transpiring in the U.S. and global economies.

Alasdair Macleod recently made the statement on my radio show that he doesn’t expect the existing monetary system to last beyond this year. In other words, not only does he believe the dollar will cease to exist as the world’s reserve currency but he also thinks all fiat will implode before the end of 2020.

I have scheduled Alasdair to be on my radio show on July 7 to discuss this topic further. You don’t have to wait for that date to understand his argument. On June he wrote an eight-page essay that you can read here: https://tinyurl.com/y9zwwulz. With reference to the chart above, he wrote: “The early morning of Monday, 23 March was a significant time, marking the top of the dollar’s trade-weighted index. At the same time, gold, silver and copper prices, having fallen in the weeks before turned sharply higher. And while oil initially followed, it was a month before it resumed its uptrend — delayed by the delivery hiatus in the futures markets which briefly drove the price negative. The S&P 500 rallied the following day, ending a near 30% decline before recovering all of it, and then some.

Something had changed. Either markets decided that economic growth, both in the US and the rest of the world was going to continue following lockdowns, and growing demand for key commodities was going to be resumed. Or, as the decline in the dollar’s TWI indicated, the purchasing power of the dollar was going to decline, and commodity prices were reflecting an accelerating downtrend for the dollar’s purchasing power.

Alasdair went on to point out that the first reason for the rise in the various markets, which of course the Trump administration is selling, is not viable given the ongoing depression in the real economy. Alasdair’s article provides details as to why this disconnect between the real economy and the inflated financial markets will inevitably result in a liquidity crisis and then a global insolvency crisis that will destroy the fiat currency system. As he points out, the political consequences are unthinkable. Of course, the only financial asset that will survive will be the monetary metals. In my Metals Investor Commentary this past week I noted this is the most positive market imaginable for gold but I say that with a very heavy heart because the hellish existence in this world when this system falls apart is unfathomable. The only solutions I can think of for surviving in this world are gold and God, the Creator of the universe. Folks without both of those two “G’s” in their portfolios I’m afraid will be lost in this world and beyond. For more comments regarding companies covered in this letter and other market related remarks see page 7. 

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.