Tuesday, March 19, 2013
Cyprus; Behind the smoke and mirrors
This Cyprus bailout stuff is fascinating. There is so much smoke and mirrors going on. Here's the real deal as I see it.
On 15 August 1971, the United States unilaterally terminated convertibility of the U.S. dollar to gold. This brought the Bretton Woods system and the Gold Standard to an end and saw the dollar become fiat currency. Fiat currency is money that a government has declared to be legal tender, despite the fact that it has no intrinsic value and is not backed by reserves. Historically, most currencies were based on physical commodities such as gold or silver, but fiat money is based solely on faith.
The end of the Bretton Woods system created the situation in which the United States dollar became a reserve currency used by the world. A reserve currency is money, the U.S. dollar, held by central banks of other countries and other major financial institutions as a means to pay off international debt obligations, or to influence their domestic exchange rate.
The international debt obligations is the interest on printing money out of nothing. The United States dollar is printed with debt attached. Every dollar comes with interest attached at the time of printing. This interest can NEVER be paid back. The system will collapse.
The world's paper money is fiat money. Because fiat money is not linked to physical reserves, it risks becoming worthless due to hyperinflation. As a result, foreign nations closely monitored the monetary policy of the United States in order to ensure that the value of their reserves is not adversely affected by inflation.
What is happening in Cyprus is due to the fact that nobody can ever pay back the world debt of printing money out of nothing. The debt can be shuffled around as we see in bailouts and Japan buying U.S. debt, but the debt remains. Printing more money lowers the value of money in circulation, causing inflation, making commodities go up in price. This too is an illusion. Commodities have no value other than what somebody is willing to pay for them. When the dollar losses value prices look like they go up cause it takes more money to buy the commodity. It's just inflation but since people are buying or giving value to an item we call it investing. Gold is still just a rock.
The world wide financial crises we see in the news everyday is the result of International Bankers controlling the worlds money supply. All the news about Cyprus really doesn't matter if nobody understands what is causing it to happen behind the smoke and mirrors.