If someone knows a system in-between or hybrid of the two I outline below, let me know.... Let me describe what i perceive as two opposite economic systems that can exist.
1. Legal tender is a fiat currency backed by no physical asset - current monetary system. In such system governments can easily take debts as $$$ printing costs nothing. Gov agencies and organizations and state sponsored companies can grow ad infinitum. Bonanza for gov. tyrants. Pretty soon (After few decades) debt is so huge, that real interest rates have to be negative to keep the whole rigged game alive.
Such system FORCES fiat currencies in place of gold and silver. Everything incl taxes, stocks, debts, loans is priced in fiat not in ounces of metals.
2. Legal tender is a metals backed currency. Gov cannot take debts easily. They are forced to balance budgets. Private sector tends to be much stronger/larger than in sys 1. Public sector is waay smaller - like in USA pre 1971.
In such system , as everything is priced and exchanged for gold/silver, value of these metals tends to be quite high in relation to other assets. And for good reason - they are non-perishable, mobile, universal around the globe, fungible, scarce - all qualities of MONEY.
FIAT system, as it constantly prints new fiat units, inevitably pushes prices of real physical things like real estate and stocks higher and higher. Esp. with negative real rates, which must be there with high enough debt levels. At the same time, it pushes the prices of precious metals LOWER in relation to other physical assets like properties and stocks. Why? In this system with high flying property prices, large portion of population is priced out - has to rent or take mortgages. In some countries like Germany , Switzerland roughly half of population rents.
Governments equipped with printing machine will go to bed with corporations, favor corporations in every possible way, as they are $$$ cows - concentrated entities perfect to milk, corrupt, etc. The stronger corporations, the weaker small businesses.
So, we have two trends:
1/ weaker, small family businesses and 1/4 to 1/2 of people who must rent. Landlords making money on these rentals simply invest in more rental properties instead of precious metals which don't pay yield.
2/ small businesses losing market share to huge corporations who have favorable treatment from the gov and banks.
End result is: quite big part of population has much less capital to park it in precious metals VS in a system where their small businesses are stronger and they fully own their homes.
Fiat monetary/econ. system basically uses a virtual imaginary TOOL called fiat currencies to suck real capital from the public and concentrate it in corporations, gov. agencies, banks and esp central banks. This is done by interest on mortgages, interests on state debt, inflation tax which applies to all currency holders.
Ask yourself : what fundamentally is US Dollar? Its not a physical asset, not a piece of land, not a company, not a technology, not a commodity. Its just damn, artificial, very clever weapon.
As about half of all existing gold is in the form of jewelry, widely distributed across population, and more than half of non-industrial silver is also in jewelry (approx 8B oz vs 5.4B oz in silver bullion), humanity already owns a perfect mean of exchange and store of value. It is "we the people" who build homes, roads, train stations, malls, etc. so why is that these properties are increasingly owned by banks or investment funds?
The reality is, we the people could easily own ALL real estate , directly, not through mortgages . We could literally be our own banks with vaulted or directly held gold and silver.
However, as you can see BlackRock buys more and more real estate, so as Chinese moguls and Bill Gates buys up as much agric land as possible. Central banks accumulate gold at quickest pace ever - Russia, Turkey, Brazil, Thailand, China - they all increase their holdings rapidly in the last 5 years. Banks and corporations suck all the best physical wealth, while flood us with their fake virtual paper dollars/euros/yens.
Our private finances are subject to hardcore audits but Fed, IMF or BIS? Never. Fort Knox? Gimme a break!
Its truly sad to watch why humanity is not able to recognize that system #1 is extremely bad for them but good only for tiny tiny elite.
1. Legal tender is a fiat currency backed by no physical asset - current monetary system. In such system governments can easily take debts as $$$ printing costs nothing. Gov agencies and organizations and state sponsored companies can grow ad infinitum. Bonanza for gov. tyrants. Pretty soon (After few decades) debt is so huge, that real interest rates have to be negative to keep the whole rigged game alive.
Such system FORCES fiat currencies in place of gold and silver. Everything incl taxes, stocks, debts, loans is priced in fiat not in ounces of metals.
2. Legal tender is a metals backed currency. Gov cannot take debts easily. They are forced to balance budgets. Private sector tends to be much stronger/larger than in sys 1. Public sector is waay smaller - like in USA pre 1971.
In such system , as everything is priced and exchanged for gold/silver, value of these metals tends to be quite high in relation to other assets. And for good reason - they are non-perishable, mobile, universal around the globe, fungible, scarce - all qualities of MONEY.
FIAT system, as it constantly prints new fiat units, inevitably pushes prices of real physical things like real estate and stocks higher and higher. Esp. with negative real rates, which must be there with high enough debt levels. At the same time, it pushes the prices of precious metals LOWER in relation to other physical assets like properties and stocks. Why? In this system with high flying property prices, large portion of population is priced out - has to rent or take mortgages. In some countries like Germany , Switzerland roughly half of population rents.
Governments equipped with printing machine will go to bed with corporations, favor corporations in every possible way, as they are $$$ cows - concentrated entities perfect to milk, corrupt, etc. The stronger corporations, the weaker small businesses.
So, we have two trends:
1/ weaker, small family businesses and 1/4 to 1/2 of people who must rent. Landlords making money on these rentals simply invest in more rental properties instead of precious metals which don't pay yield.
2/ small businesses losing market share to huge corporations who have favorable treatment from the gov and banks.
End result is: quite big part of population has much less capital to park it in precious metals VS in a system where their small businesses are stronger and they fully own their homes.
Fiat monetary/econ. system basically uses a virtual imaginary TOOL called fiat currencies to suck real capital from the public and concentrate it in corporations, gov. agencies, banks and esp central banks. This is done by interest on mortgages, interests on state debt, inflation tax which applies to all currency holders.
Ask yourself : what fundamentally is US Dollar? Its not a physical asset, not a piece of land, not a company, not a technology, not a commodity. Its just damn, artificial, very clever weapon.
As about half of all existing gold is in the form of jewelry, widely distributed across population, and more than half of non-industrial silver is also in jewelry (approx 8B oz vs 5.4B oz in silver bullion), humanity already owns a perfect mean of exchange and store of value. It is "we the people" who build homes, roads, train stations, malls, etc. so why is that these properties are increasingly owned by banks or investment funds?
The reality is, we the people could easily own ALL real estate , directly, not through mortgages . We could literally be our own banks with vaulted or directly held gold and silver.
However, as you can see BlackRock buys more and more real estate, so as Chinese moguls and Bill Gates buys up as much agric land as possible. Central banks accumulate gold at quickest pace ever - Russia, Turkey, Brazil, Thailand, China - they all increase their holdings rapidly in the last 5 years. Banks and corporations suck all the best physical wealth, while flood us with their fake virtual paper dollars/euros/yens.
Our private finances are subject to hardcore audits but Fed, IMF or BIS? Never. Fort Knox? Gimme a break!
Its truly sad to watch why humanity is not able to recognize that system #1 is extremely bad for them but good only for tiny tiny elite.
