Yes, I get that to a point, they can print a currency at will, and produce as much as they want. But, I strongly disagree, that fiat is not backed by anything, the value will be reached by the market based on the creditworthiness of the country. I'm not suggesting barclays bank has xxx pounds sterling, and can back it with xxx pounds of gold. However, the assets of the bank or the country for that matter should balance. QE don't create more money, it's like having a large pizza and cutting it into 10 slices instead of 8 slices. There may have been billions of extra £'s made out of thin air, but each pound almost overnight lost value.
Im not suggesting gold moves in tankers between states. I am saying that the value of a currency is backed by the bank or country ability to produce assets in the form of gold if required.
The fiat that is being issued by QE is being used to buy the worst of the worst junk from the banks that hold them to give them the appearance of financial health. All the dog-shit assets are being moved to the balance sheet of the CB's, and yes, it balances because they do not mark them to market and instead assume they will hold to maturity and be repaid or else sell at a later date to contract their balance sheets. The chances of either of those events happening are slim to none. Nobody is calling anyone on it because they are all playing the same game. The FED is now the biggest hedge fund in the world, leveraged about 80:1 (Lehmans was 40:1 when it went bust), and the assets that are leveraged are probably worthless (the Japanese may take this title soon if they have not done so already)
Nobody calls anybody on it because they are all playing the same game and if one domino falls, all the rest will follow. The emperor has no clothes and everyone in the know knows it. It's now just a confidence trick on Joe Public, who, like you (no offense) does not understand the dynamics at play.
The Euro is now largely backed by Greek, Spanish, Portuguese etc govt debt ... good luck with that. Bail out after bailout, they issue Euros and buy the distressed debt, kicking the can further and further down the road under the false assumption that it can go on forever. It won't. But then the music stops its going to get very ugly very fast. How long that will take, nobody knows. All it takes is one systemic shock. The alternative of course is a false flag event, or just plain war.
Gold has virtually nothing to do with it, except that CB's hold an increasingly small portion of their reserves in gold, and there is the an alternative to complete collapse - a complete revaluation of gold such that its value is so high that the balance sheets look respectable again. Not impossible, but unfortunately most western CB's have been flogging their gold to India and China for the last decade. Most of this takes the form of leasing, whereby ownership is transferred notionally and they never hand over the gold, the assumption being that they will if asked. That assumption may be proven to be very wrong, and it is largely suspected that the same gold has been leased many times over. There are more 'calls' on gold than gold in the vaults. Again, nobody wants to play that card yet, because one failure to deliver gold will lead to a collapse of the pyramid. Why do you think Germany has been so quiet about the non-repatriation of the small portion of their gold they requested from the US? The US has said it will take 5 years to transfer what could be loaded onto a few cargo planes and transferred with ease. But they have not and will not. They have given them a pitiful amount so far.
So the game continues ... for now.
But the players are starting to hear the BTC mantra .. if you don't hold you PK's, you don't have Bitcoin, you have paper Bitcoin. Same goes for gold as confidence wanes and nerves get strained. So countries are becoming increasingly nervous about the gold that is declared on their balance sheets but held in vaults in other countries. As are some of their citizens. It's going to get messy. It's not if, it's when. This is already unfolding in several European countries.
And for what its worth the UK sold most of its Gold years ago (thanks Gordon, nice one
) to bail out banks that were caught short and could not deliver on futures contracts. Part of the agreement was that they removed themselves from the gold market afterwards. I believe Rothschilds was one of the banks involved.
There is a lot of very interesting stuff out there and it all fits together far too neatly to be just dismissed as a 'conspiracy theory', though naturally that will be the first reaction of the sheeple.
Holding fiat does not give you any call on your CB's reserves whatsoever. In a free market currencies would adjust to reflect the quality of reserves and their ability to borrow in the bond markets but thats as far as it goes. And we don't have free markets ...
EDIT: So I guess you are right in a sense that people are starting to realise that about the only tangible asset on Gov's balance sheets is the negligible amount of gold left since moving form the gold standard. But to say that this is what determines a countries credit-worthiness is stretching it waaaay too far. It probably ought to, but right now it does not. See the problem ??
Sorry for dopplepost .. don't know what happened there !!
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