Global Debt Bubble Set to Burst as Mass Awakening Will End Central Bank Control

 The yellow vest (a.k.a. gilets jaunes) protests in France are a sign  of a populace that has grown more discontent with their falling standard  of living and who feel completely disconnected from their elected  politicians. The protesters have a wide range of concerns (i.e.  immigration, taxes, free trade, benefits, etc.) that do not neatly fit  into the left-right paradigm. It also appears that display of anger is spreading throughout Europe as in Belgium:

A  retired man told RTBF that he receives a pension of €1,350 a month. “I  get it on the 23rd of the month. It’s now the 8th and after I’ve paid  insurance, rent, energy bills – which cost €150 – I only have €200 left  for living expenses,” he said....One  protester gestured to the European institutional buildings behind him  while talking to a NBC Euronews reporter. “There, in ‘Europe’, they’re  having fun, they’re laughing," he said. "The people who make the laws  are the ones driving us further into the ground. We have empty pockets. We shouldn’t be called the ‘yellow vests’, but the ‘empty pockets’.”

I outlined how the current economic system is not working well for 35% - 40% of Americans in my previous article.  I view central banks, especially the Federal Reserve (FED), as a large  part of the problem. For a more detailed history and analysis, I highly  recommend the book 'The Creature from Jekyll Island: A Second Look at the Federal Reserve'  written by G. Edward Griffin. Former Congressman Dr. Ron Paul called it  'a superb analysis deserving serious attention by all Americans'. I  unequivocally reject critics who smear the book as 'conspiracy theory' and scurrilously attempt to demonize anyone who engages in critical thinking. Just because the FED website  ends in .gov does not make it a government institution. The FED is a  private corporation and as federal as Federal Express. For anyone who  thinks the FED knows exactly what it is doing, recent remarks from Vice  Chairman Richard Clarida's about how the FED Chairman is 'in a darkroom' would probably not inspire confidence.

While  it is unclear what direction the protests will take, the Europeans  appear to be going through a mass awakening, similar to the one in the U.S. It would likely impede any central bank from bailouts in the near future. 

A few points that I want to reiterate: 

• The era of central banking (FED's inception was in 1913) has been marked by war (WWI, WWII, Korea, Vietnam, etc.) and numerous regime changes (courtesy of the CIA).
• There is no way the U.S. can consider itself a 'free' country when the ultimate power remains embedded with a cadre of bankers.
• The era of central banking is coming to an end as the FED will either be either dissolved, [restructured] or phased out. 

Central Banks Face Math Problem
The  world is addicted to cheap credit, the FED rate increases are hurting  the economy, U.S. corporations are under duress and U.S. debt continues  to explode. One may ask how I could be so confident in my assessment  that the existing fiat currency system will end. My answer is very  simple - basic math. I previously warned about the massive risk of derivatives to the financial system and detailed how the debt (now at $21.87 trillion) puts the solvency of the U.S. into question. CNBC reported  last month how U.S. companies are carrying a $9 trillion debt load (86%  higher than 2007). Analysts worry that companies teetering between  investment grade and junk status could cause market trouble should their  standing deteriorate. Bloomberg just reported  how global debt hit a record $184 trillion last year, equivalent to  more than $86,000 per person. Central banks tried to solve the 2008  financial crises by lowering interest rates and adding more debt. The  original debt was mostly not written off and an inevitable crisis was  simply deferred. 

Interestingly, Mike Maloney put out a recent video  on the 'financialization of government' where there exists strong  correlation between the stock market and tax revenues. If the stock  market does not do well, the FED must print money to lift stock markets  to get enough revenues. This dangerous predicament approaches Ponzi  scheme conditions.

There have been a couple of dramatic updates in recent weeks.

Update #1 – Closing Days of the Petrodollar
The petrodollar system  (in effect since the 1970s) is the primary reason the U.S. dollar is  still the world's reserve currency. Oil producing countries like Saudi  Arabia do not sell their oil in currencies other than U.S. dollars. In  recent years, there have been senseless wars in Iraq, Libya and Syria to  protect the petrodollar. Without this agreement, the U.S. dollar would  likely lose its role as the global reserve currency over time. China has  made serious efforts to assert hegemony in the Middle East and in March introduced oil futures contracts priced in Chinese yuan. These contracts have achieved a 16% share of the global market  and reached a pace of expansion termed as 'explosive'. The  repercussions of Saudi Arabia breaking ties with the U.S. and moving  closer to China are unknown but potentially volatile. The recent vote by  the Senate to end U.S. support for the Saudi war in Yemen could hasten this break. Stunningly, a new report claimed the U.S. has become a net oil exporter for the first time in 75 years. While this may have been slightly misleading, the trend towards energy independence for the U.S. could render the petrodollar system obsolete and irrelevant in a few years.

Update #2 – U.S. Has Gold
In  2015, President Trump (then a private citizen) was asked if he could  envision a scenario where the U.S. could go back to a gold standard. He  had some interesting comments:

“In  some ways, I like the gold standard and there is something very nice  about it but you have to go back at the right time… We used to have a  very solid country because it was based on a gold standard for it. We do  not have that anymore. There is something very nice about the concept  of that. It would be very hard to do at this point and one of the problems is we do not have the gold. Other places have the gold.”

According to some sources (which will be covered in a future post), the U.S. now has the gold.

Gold Standard
It  is somewhat difficult to envision how a gold standard would work in  today’s digital economy. Last year, former FED Chairman Greenspan confirmed its historic value:

"The  gold standard was operating at its peak in the late 19th and early 20th  centuries, a period of extraordinary global prosperity, characterized  by firming productivity growth and very little inflation.But  today, there is a widespread view that the 19th century gold standard  didn’t work. I think that’s like wearing the wrong size shoes and saying  the shoes are uncomfortable! It wasn’t the gold standard that failed;  it was politics."

Gold has played a part in  policy even after Nixon closed the gold window and broke up the Bretton  Woods system in 1971. According to this Forbes article,  a panic occurred between 2011-2012 and to prevent a further decline in  the dollar’s value there was probably ‘financial market manipulation at  an unprecedented level’.According to another Forbes article,  ‘having a gold-linked currency made the selling of bonds, or equities,  also known as international capital flows, much more attractive. The  great era of the worldwide gold standard, in 1870-1910, was a time of  internationalization, free movement of capital, and high levels of  investment in emerging markets.’. As the U.S. trade deficit jumped to a 10-year high in October,  it is unclear how the U.S. could maintain this imbalance without losing  all its gold. It would be prudent U.S. policy to reduce its trade  deficit prior to implementing any sort of gold standard.

Cryptocurrency Future
I received a few humorous personal attacks  in my last article where I merely suggested that cryptocurrencies could  provide an 'unknown path with the possibility of a better future'. I  believe the future is promising for blockchain technology. No one can  say with certainty that Bitcoin or another cryptocurrency will replace  the U.S. dollar as the world's reserve currency. Several  cryptocurrencies have dedicated development teams, miners and advocates  that represents a kind of community. But, as evidenced by the Bitcoin Cash war, individuals take actions that do not always represent the community’s best interest. Regardless, an infrastructure is being built to attempt to coexist with (if not supplant) the existing monetary system. The upcoming January 3 Bitcoin Proof of Keys day to declare ‘monetary sovereignty’ should be watched.

Summary 

• The global debt bubble is on track to burst
• The mass awakening in Europe (in addition to the U.S.) will impede any central bank bailouts
• Higher U.S. energy production could render the petrodollar system obsolete
• A gold standard is the most readily available alternative to the  system of central banking but with the risk to the U.S due to excessive  trade deficits
• Cryptocurrencies hold promise but are not ready at this time to replace the system of central banking

Future Developments
I  certainly would never pick a date for any sort of financial crisis nor  offer financial advice. But Internet entrepreneur and political activist  Kim Dotcom does offer somewhat provocative advice via this tweet.  I guess anyone with capital can’t say they haven’t been warned. I  completely understand how many readers may have difficulty coming to  terms with such radical changes to our monetary system. People have been  literally brainwashed into thinking the FED acts as some benevolent  force for the common person’s best interest. Sorry, bankers at Goldman  Sachs are not ‘doing G-d’s work’.
There is unfortunately a large entrenched establishment intent on maintaining the status quo. As Upton Sinclair said,  "It is difficult to get a man to understand something, when his salary  depends upon his not understanding it!". I do think there will be  serious displacements in the workforce. I would guess that the banking,  media/entertainment, and defense contractor industries along with the  political bureaucracy in Washington DC would be adversely impacted. Many  employees will need to transition to other areas of work. Since I do  not endorse wealth confiscation (aside from extreme cases),  I do foresee a problem. How do the estimated 35% - 40% of Americans  (referenced earlier) who have hardly any savings obtain access to  capital? I am sure there is a great plan out there. 

This post originally appeared on News with Chai blog.