A Tremendous Secret

By John A. Rubino, Kitco

Last week FOFOA posted a long article on the coming devaluation of the dollar and how it might play out. He thinks it will be sprung on us without warning — sooner rather than later:

The point is that during times of transition, surprises are always the order of the day. We have a crazy-out-of-control government that has given in to the temptation of printing its way out of this mess. The deflationists view this as an exercise in futility, while the inflationists say that you cannot print these amounts of dollars without it affecting the markets sooner or later.

A few cunning analysts are hedging their bets saying we will see another deflationary collapse first, followed by a bout of high inflation. But nearly all of the pundits who are still predicting “doom” have lengthened their horizon to several years to make way for the slow speed at which this train is tumbling down the tracks.

Frankly, I’m not buying it.

Call me contrarian, but I say that when the rubber band breaks this time it will snap back with a speed and fury that will make your head spin. In fact, I think that the longer this drags out (and I’m only talking weeks and months now), the more abrupt the correction will be.

Both the 38 year timeline and the 96 year timeline have created an imbalance in the fractional reserve system that has gone parabolic in the last decade. I am talking about gold. No, the price of gold has not gone parabolic, but the ratio of available gold to outstanding paper currency HAS gone parabolic. The central banks of the world are well aware of this. It is why they have slowly, inconspicuously changed from net sellers into net buyers. This gradual shift is extremely significant, because as net sellers they were supporting their own fiat regime. But now as net buyers, they, as a group, are stressing it. Why would they do this unless they knew it was about to reset?

This fractional gold reserve imbalance is the one imbalance the media and governments do not want you to know about. This is the one that will RESET the entire system. This imbalance, once corrected, will make central bank fiat currencies sustainable once again. This is why they are net buyers!

Do I think this magnitude of a reset could happen overnight? Yes, I do. Why? Because that is the way you get the most “bang for your buck”. Surprise is the order of the day! “Devaluations always happen by complete surprise as to exert maximum leverage effect.”

The idea that we’ll wake up one day to discover that the international monetary system has been “reset” and that our dollar/euro/yen savings have taken a huge hit (while the local currency value of our gold and silver soar) reminds me of an exchange in The Virgin’s Lover, by Philippa Gregory (yes, I like historical romances). The year is 1560 and the young queen Elizabeth rules a country nearly bankrupted by a Spanish alliance that produced only war and debt. The English treasury has been systemically debasing its coins by clipping and shaving them, so that their face value vastly exceeds their gold content.

Elizabeth’s advisors have decided that the monetary system needs to be reset, and have been importing borrowed gold. On the appointed day they intend to call in the circulating coins and replace them — by weight rather than face value — with newly-minted coins. This devaluation will transfer citizens’ wealth to the government, impoverishing the former and enriching the latter. And if all goes as planned it will come as a surprise to most of the country.

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