This week sees us at a very interesting point in the ongoing financial debacle which is unfolding around us. Once again, we need to take particular care with our investment activity, and take notice of pronouncements from trusted sources. Our trusted sources include Eric King, and by extension, those sources that Eric himself finds valuable and trustworthy. We wish to stress once again that King World News is a pre-eminent source of valuable information for us about precious metals investment.
With this in mind, we discuss a fascinating interview by Eric with Ben Davies, CEO of Hinde Capital, an investment firm operating out of the UK, which focuses on commodities and precious metals. There is a link on KWN to a letter from Ben to his investors, titled “The World Monetary Earthquake”, which we urge you to read.
The substance of Eric’s interview with Ben is as follows.
- The global currency system has become extremely unstable because of the linking of the Chinese currency, the Renminbi or Yuan, and the US dollar (USD). We will refer to this as linking as the RMB-USD peg.
- The situation has deteriorated to the extent that the artificially low RMB now almost certainly has to be unwound – this will be a traumatic event – which could destroy the current fiat currency system, possibly implying a return to some form of gold standard.
- This artificial RMB – USD peg has meant that China has been able to manufacture goods at a low price, which have then been consumed by the rest of the world. This has resulted in a huge influx of dollars into China, and these dollars have been reinvested in the US, by purchases of US government and corporate bonds, and also those of government agencies such as Freddie Mac and Fannie Mae. This has driven down yields in the US, resulting in artificially low interest rates, fuelling cheap borrowing – particularly mortgages.
- Unwinding the RMB – USD peg could unleash a wave of currency devaluations around the world.
- Many countries are faced with a 3-way impossible Trilemma:
(a) Maintaining a fixed exchange rate
(b) Allowing free movement of capital
(c) Maintaining an independent monetary policy
One country on the forks of this trilemma trident is Japan, which is in the throes of a high yen induced recession. It is now extremely likely that Japan will have to move to full-blown Quantitative Easing. Thus Ben sees hyper-inflation coming to Japan. This could result in a move away from Japanese Government Bonds (JGBs) and into gold – thus providing a huge upward impetus in the gold market.
Whatever the outcome, there is likely to be a short squeeze in the gold market, with some disorderly behaviour to follow – the volatility will increase – which is something that Jim Sinclair has been warning us about for some time.
Hold on to your hats and your convictions, folks – it’s gonna be a wild ride!
And to finish here’s a great video interview with Gerald Celente of the Trends Research Institute who we’ve featured previously. He covers a diverse range of topics including currency wars, gold and even obesity, artificial foods and pharmaceuticals being the next great plague. Importantly he talks about the 20% of people that will be the new “renaissance” of free thinkers. Our readers are likely amongst them we reckon!