Hint: They’re evil people who meddle in everything and cause myriad ruckus around the world, but talking finances, they’re king of the hill, and it will matter…
So it’s all starting to make sense now.
We keep hearing the terms “global reset”, ‘monetary reset”, and “financial reset”, but resetting what to what, and how would that look?
First, why would there be a reset?
Resets happen quite regularly for reasons such as hyperinflation, default on debt, break-down of the system, and loss of confidence, etc.
The last reset was in 1971 when Nixon closed the gold window.
Prior to that, it was the Bretton Woods Agreement that came out of WWII.
And now, we’re close to the point of the next reset.
The way that a nation conducts a reset, traditionally, which has always been the case and will be the case again, is that gold is revalued to a price that gets it equal to the outstanding debt or outstanding money supply of the nation.
Let’s use the example of money supply and look at where things stand right now.
In our example, let’s take ‘M0’, which is a type of money supply.
M0 is the most liquid type of money there is.
M0 is a measure of the money supply which counts all the cash floating around in the system as well as the liquid assets held in checking and savings accounts. Think of M0 as something that can be converted into cash on a whim.
So in our example, we will be resetting the price of gold to M0.
One question that comes up is, how much of the currency should be backed by gold?
We often hear analysts, such as Jim Rickards, throw out numbers of 20% gold backing or 40% gold backing.
I’m not goin’ down that road, however.
You see, Article 1 Section 8 of the US Constitution says that congress is to coin money and fix the standard of weights and measures.
Then, Article 1 Section 10 takes it one step further and requires that only gold and silver be our money.
This means the dollar (and units of the dollar, and multiples of the dollar) is supposed to be a specific weight and purity of gold & silver.
So I’m going to go with a 100% gold backing because that’s the only money we’re constitutionally allowed to have.
And since I’m not a very good mathematician, Santiago Capital has done all the grunt work for us:
So looking at the chart above, we can get back to the original question in the title of this article: Who has the soundest currency?
First, what does that mean?
That means that for the amount of gold backing their M0 monetary supply by 100%, this country needs the lowest U.S. dollar price for gold to fully back their currency.
In other words, their currency is more sound than those who need a very high U.S. dollar price for gold to 100% fully back their currencies.
Said differently, if a nation has a crap-ton of currency (M0) out there, and not a lot of gold, they need a sky high gold price.
Look at Japan, for example.
Now, the nation that has the best ratio of gold compared to the money supply outstanding?
You see, Russia only needs a $2,368 (USD) gold price to fully back their money supply.
Compare that to the United States, where we need nearly a $15,000 gold price to back our money supply.
It is all starting to make sense now, isn’t it? This is exactly why China and Russia have been so busy stacking the yellow metal.
Speaking of China, if we cast aside the World Gold Council “official reserves” for China and use a number of tons more in line with what many analysts believe, then China has an even more sound money supply than Russia.
Again, the math has been done for us, on the working assumption that China really has 20,000 tons of gold and not the paltry stack the WGC says they have.
Here’s the number’s crunched by James Anderson:
— James Henry Anderson (@jameshenryand) March 21, 2018
Looky there: China needs an even lower USD gold price than Russia.
“Unofficially” of course.
What can we conclude about all of this?
China and Russia are in way better shape than the United States, and China and Russia are in way better shape, financially, than most countries for that matter.
Most countries need between a $10,000 and $20,000 gold price to cover their M0 money supply.
Granted, this is a country by country reset in our example. A global reset would look much different because we would be talking about total global M0 divided by total global gold reserves.
But we’re not going there for now. For now, we’re looking at financial soundness of individual nations.
Wrapping it all up, what can we conclude?
This is more evidence of the ongoing shift of power from West to East.
With the exception of Japan, the East is in much sounder shape than the West, and as they say, “he who owns the gold makes the rules”, all things considered, China and Russia are near the point if not at the point of being able to make the rules.
Furthermore, China and Russia are still very busy stacking the shiny phyzz, and as just shown, their finances are much sounder than ours – no complicated math or sophisticated models needed.
Again, all you have to do is take the nation’s M0 money supply and divide by the ounces of gold, and your answer is the dollar price you need for the M0 to be fully backed by gold.
In the case of Russia, the math looks like this: $141,237,200,000 / 59,651,090 oz = $2367.72 per oz.
Side note: Here’s some more hi-res pics inside Russia’s gold vault for anybody wanting some eye candy of a fat stack.
Bottom line: Sooner or later the world is going to eat their losses on U.S. Treasuries and ditch the dollar.
The dollar is on the life support of U.S. Military Backing.
Think about this: If the “economic recovery” is long in the tooth, with the U.S. military actively engaging around the world in armed conflict since basically September 11th, 2001, the U.S. military is surely over-extended and therefore the U.S. military support of the dollar is also long in the tooth.
In conclusion: China and Russia are busy stacking gold (and silver) because they have the opportunity to stack at bargain basement prices, and we’re dumb enough to sell it to them at bargain basement prices all to keep the dying dollar alive just a little while longer.
The end is near.
– Half Dollar
About the Author
U.S. Army Iraq War Combat Veteran Paul “Half Dollar” Eberhart has an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill. Paul dived into gold & silver in 2009 as a natural progression from the prepper community. He is self-studied in the field of economics, an active amateur trader, and a Silver Bug at heart.