The past few weeks have brought about many significant changes to the geopolitical landscape.
Most recently, Syriza has gained a majority in the Greek elections. The radical left-wing party has actually formed a coalition government with the far right. Syriza promises to rid Greece of the pathology of “austerity”. They plan to do this by defaulting on their debt while launching huge public projects. In his first act as president, Tsipras, has raised the minimum wage by a mere 80 euros to around 750 euros a month. Doesn’t say much about the conviction of their believes…
On the monetary front, the ECB has finalized the details of their asset purchase programme (QE). During the next year the ECB will inject around 80.000 million of new credit every month. For those of you familiar with the corrosive effects of such blatant debt monetization, you will easily understand why the Swiss Central Bank has decided to abandon its long standing peg with the euro.
Indeed, the Swiss decided they would no longer “print” more Swiss francs to stop the appreciation of the franc vis the euro. In other words, the Swiss are fed up of taking everyone’s euros and no longer wish to expand, or even hold, such large euro balances.
Oil continues to hit record lows and the dollar still looks strong. Of course, in reality the dollar is not strong. All major western fiat currencies, yen, dollar, euro… are in a competitive race to the bottom as everyone moves to gold. As transactions are settled in dollars, this creates the illusion that dollar demand is up. In fact, people are asking for their dollars because they want to get rid of them!
The gold standard is going to return to the center of world monetary policy through the trade window. Indeed, for the past 10 years or more we have seen a progressive abandonment of the dollar and all fiat currencies in favour of gold. Wise countries are using gold to purchase and sell goods.
We can probably expect the gold price to double, triple, quadruple even in the following months. In fact such an arrangement had already been reached by most nations including the U.S.A.
Doubling the gold price would put and end to the pain. But the U.S. went against this pact and instead offered a Ukraine war and ISIS. It is possible the BRICS may unilaterally decide to go ahead with this.
What may come in the following months is unpredictable. Doubling of the gold price followed my massive bank defaults in the west? Germany abandoning the Euro and EU and joining forces with the BRICS? Increased terrorism and more fear instilled into civilians? The outbreak of war?