Submitted by SD reader BH
Venezuela devalued their currency the Bolivar by nearly 50% on Friday and it now looks like Egypt will be next. The Venezuelan devaluation is merely a small chapter in the current global currency war.
The story in the Financial Times is headlined “Venezuelan devaluation sparks panic“. I read the article and was surprised at the content because when I read the headline I was fooled. OF COURSE the Venezuelans are in a panic, they just lost nearly 50% of their purchasing power over one evening!! The “panic” that I thought would have been written about was “who’s next?”.
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Think of it this way, by not allowing a price rise and also not pressing your hand to the downside is not creating any emotion or urgency to buy…now. Yes it is irritating the long term holders but the lack of movement has taken Gold and Silver out of the spotlight. This way, anyone looking to buy on dips or “trend followers” chasing an uptrend are basically made to sit on their hands. Maybe I am wrong in this thought process but it seems to fit AND is the best strategy available in my opinion. Lock the price down, keep whacking it often and steadily to make as few emotional waves as possible. For long term holders of metal assets this is like Chinese water torture but once this changes the supply demand equation will go ballistic. As I have said all along, “either you are in or you’re out, when the music stops you will not be able to correct or better your position”. If you have not positioned yourself yet, use the current calm before the inevitable storm. You will need to be prepared to ride out whatever comes…with whatever you entered with.
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/images/live/s_silv.gif)
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Looking at the picture at the top it will be nice, just to walk around with a pocketful of 90%’ silver rather than that load of Fiat above. Lol
As for the devaluation of the dollar, I believe they will let it trickle down so that the sheepie don’t realize what is happening to it and when the Derivatives collapse all hell will break loose then we will see a full fledged Devaluation. Keep Stacking
Countries devalue their currencies in different ways depending where they are at on the food chain. The U.S. began the process in earnest in 1971 by eliminating the final tie to gold. And ramped up the devaluation process in recent years by using the Fed to rapidly increase the supply of money and credit. That’s how the world reserve currency devalues. It takes time.
Other countries do not have reserve currency status and fix a peg to their own national currency. By adjusting the peg they can revalue their national currency overnight. But, their will always be a competing currency like the dollar that makes the national currency subject to hyperinflation. Examples are Zimbabwe and Venezuela.
Still other countries have large manufacturing bases and fall between. They can print, but have greater leeway before a robust inflation gets out of control. Example Japan And China.
But, in the end it’s all fiat and phony and governments and people will return to real value, real money, gold and silver.
Unwittingly, the U.S. economic sanctions against Iran have forced the development of non dollar trade settlement between nations. Turkey now serves as a physical gold intermediary for trade with Iran. China is entering into bilateral currency swaps with trading partners all over the globe. Mostly because we backed them all into a corner. In the end we only hastened our own dollar demise.
“In the end we only hastened our own dollar demise.”
Considering the lack of competency with which the US economy has been handled, especially since the mid-1980s, this should not surprise anyone. This is when the Law of Unintended Consequences jumps up and bites us in the @$$.
US currency devaluation IS already occurring via the inflation process. Bernanke & Co. keep saying that inflation is 2% or so but that is a lie. Only those policy wonks who live on paper can believe this. The rest of us live in the REAL world and MUST have both food and energy in order to live. They are necessities and not options. Given that, they have to be included in the CPI… but are not. The Fed does not include them because they know that if they did, they would be showing the same 9.5% inflation that John Williams is showing when he does this calculation using the very same method that the Gov / Fed used to use before 1995 when cooking the books became official policy. They stopped counting food and energy on the pretext that “they are too volatile”. This is complete nonsense and anyone who has studied even a little math knows it. They actually stopped counting these because they were rising too fast in cost and driving up the CPI more than was desired. Instead of taking the appropriate steps to reduce inflation, they simply decided to stop counting the things that were rising fastest. By doing that, their inflation calcs now show the desired rate of inflation.
If this sounds familiar to anyone else, it’s because it is! They use the same lie when reporting unemployment, only instead of not counting food and fuel, they stop counting those Americans who have exhausted themselves looking for work and who have stopped looking. These people still want jobs and would take one IF it was available. By not counting this growing group of Americans in the official unemployment statistics, they can say that unemployment is only 8%, when it is actually closer to double that. Add in those who are underemployed by doing jobs below their level of training and experience or those who work part-time when they really want a full-time job and this number jumps to 24%. This is not all that different from the 25% unemployment of the 1930s. But we, of course, are in a “recovery”, at least according to official Gov / Fed pronouncements.
Unfortunately for them, the American people are not stupid. Those who shop for food and fill their gas and oil tanks are WELL aware that prices are up substantially. And not just for food and fuel either. Many things are up in price now and household budgets across the land are feeling the pinch. If we REALLY had 2-3% inflation, we would not be feeling so pinched. Having near 10% inflation, however, is a whole new ballgame.
Because of all this, Americans know that we are being lied to. I don’t know which is the bigger insult… being lied to or the expectation that we are unaware of it. Clearly, our leaders have no faith in our ability to handle the truth, so feed us pablum in the hope that it will go down easier. Well, we are not unaware of it and we are getting royally PO’d. This is why the confidence in US leadership is near all time lows. Their lack of faith in us begets a return of the favor.
I agree with the analysis of TPTB not pressing their hand too strongly. They know that dropping silver quickly to $26 or god forbid crashing support and taking it even lower would unleash an epic torrent of buying and clean out the stocks like in 2008 when they pressed it to under $10 (even though you couldn’t buy any silver anywhere for $10 LOL.) They also know that many people will not pull the trigger as long as silver levitates above $30 because they want to buy cheaper and are sure that lower prices, however briefly, is in the cards. Are they right? I dunno. My approach is to keep accumulating slowly to an already nice position, but also not going all in and keeping some fake cash/govt chit too just in case.
I agree with this totally and am how I am looking at my short/medium/&long term investing. Especially the last line.
I think the devaluation war has been over exaggerated. Yes the economic minnows are devaluing against the dollar, because the dollar has tried its hand at devaluing its currency. However the risk of devaluing a real currency that is used world wide such as the Dollar is that it will spook investors. The US Government can not afford to loose its hand in the Ponzi Bond scheme. If they devalue too quickly then it means that the Bond market will be killed off, stopping all possible means for the US Government to raise money in the open market.
Also if the Dollar is devalued, but all currencies world wide are devalued at the same time, then the whole exercise will be futile as prices will not move higher for countries for exporting such as China.
If there is seriously a devaluation war, then this is going to end badly. remember even Precious metals are measured against other countries, they will move down relative to the current prices. The only good news for precious metals is risk.
Recommend spending 30 minutes with Martin Armstrong. Suffice to say Armstrong is an international economic icon. China goes to him for advice.
http://goldsilver.com/news/martin-armstrong-lunch-speech-at-bangkok-rotary-club-7th-november-2012/?utm_medium=email&utm_campaign=Gold++Silver+Weekly+-+2+-+12+-+2013&utm_content=Gold++Silver+Weekly+-+2+-+12+-+2013+CID_d282c04043b5dfb5a1db4bff8002d1b9&utm_source=GoldSilver%20Email%20Marketing&utm_term=read%20more
Boy Howdy, Silver is zooming in London. Already up 17 cents. I gotta go collect some money off my paper route!
Imagine if you will if the transfer and mandated payments like SS and Medicare were tied to a real inflation rate instead or the 2% BS that shows up in those payments. They would be double the level of 12 years ago.
Imagine what interest rates; Fed, Munibonds or home loans would look like if the average rate of inflation from 2001 to 2012 was not suppressed by the Fed holding down the rates with multi trillion dollar FIAT floods and QE printing.
Well, we’re not living in that world. This one is prepariing some nasty surprises for us. Japan has devalued their currency so heavily that the Korean won is 20% higher against the Yen in 3 months. the Swiss Frank are the Euro are hurting badly with exports being nearly crippled due to the signficantly higher prices for Euro goods. Even China sees this as a threat but may be willing to work closely with Japan to further the economic damage they are both doing to the west. We are in a pincer movement and the Dollar’s swings are inflationary in all respects.
coming soon to a country near you…
Currency wars are like naval battles where all the ships take on water and begin to sink.
When devaluation goes viral and spreads it’s called a currency war. This is a currency war and one fights it by getting out of currencies and into other assets such as money. We know this but, it would help if the other 98% would pay attention. I bet Venezuelan Ag stackers are feeling a little better than their neighbors right now. A 46% overnight loss of wealth is crippling. So crippling that those same stackers may be forced to slowly sell off their stack to survive. Hope they are also preppers. If they are then they may not have to sell off their stacks. Point Served
I was watching this overnight dip “again” and have decided that instead of buying a little more Ag that food, another set of water filters, 2-30 gallon open top plastic drums, another 5 gallons of kerosene, 10 quarts of motor oil, oil filters, extra spark plug for the generator and so on, might be a better use of my FPS this week.
You make a very good point, friend RRG. I too have to force myself to pull away from PM deals on occasion and buy the stuff that will make my life less painful when the Reset occurs. Still need a bio diesel generator and some other pricey things too!
Doesn’t a 46% devaluation in currency translate into a 92% hit in ones savings if you must spend your savings to survive now? The saved currency is worth 46% less and prices are 46% higher. Or is it just the 46% loss in purchasing power?