Why A New Monetary System May Be Our Only Hope


"There is nothing better than gold. If you own gold already, hold, and watch for signals to add more."

Excuse me if I sound like a pessimist today. I'm not. I'm actually an optimist about our country's future. I'm also optimistic for the future of the global economy.

But I'm also a realist.

No matter who wins the U.S. presidential election come November 6 ― there is simply no way our country will ever make good on its gargantuan debts and pile of IOUs that now total as much as $212 trillion.

Washington could raise taxes to 100% of your income, and the debt still wouldn't be paid off. They could slash spending to zero, and the debt would not be paid off.

The same applies to Europe. It's drowning in debt and there is simply no combination of tax increases and austerity measures that will fix its problems, either.

So what's the solution then? It's actually very simple.

The world needs a new monetary system. New "rules of the game," as central bankers like to call them.

Or a "new financial architecture" the term used by many academics. A new "Bretton Woods."

Thing is, that's where we're headed. Toward a new monetary system. But getting there won't be easy.

Right now, for instance, the world is mostly caught up in competitive currency devaluations. No country wants a currency that's too strong for fear it will hurt exports and aggravate deleveraging and deflation.

So the Fed prints money. Ditto for the European Central Bank. In fact, almost all major central banks are now printing money. They all think that money-printing will inflate away debt, cheapen their currency, revive exports and fix unemployment.

But the fact of the matter is that no amount of money-printing will solve any of those problems.

It's not going to solve unemployment in the U.S. or in Europe. It's not going to get rid of unpayable debts. It's not going to fix unfunded pensions, Social Security, Medicare.

It's not going to rescue Europe's zombie banks and governments.

And it's not going to build real wealth for anyone.

At best, all it will do is artificially inflate asset prices.

Meanwhile, the massive debts our country and Europe has will continue to mount. The cost of servicing the rising debt will become more and more burdensome.

And this will go on until the entire house of cards on both sides of the Atlantic comes crashing down.

We've already seen the first phase hit, and pass. We're now in the middle of the eye of the storm, where there's relative calm. But soon, the next phase, the next wave of the storm will hit.

It will be the worst phase of this great financial crisis. It will tear apart everything you thought you knew about the world, about your world, about your wealth, your children's future, your grandchildren's future.

It's where gold will soar to well over $5,000 per troy ounce. Silver to over $150. Oil to near $200. Food prices to the moon. Interest rates surging. And more.

And then, when the house of cards finally comes crashing down, world leaders will finally get together to change the world's monetary system to wipe out and forgive bad debts and to start anew with a fresh balance sheet.

I've discussed this before in a previous Uncommon Wisdom column and in my Real Wealth Report, and where the ideas I set forth went viral on the Internet, even appearing on Rep. Ron Paul's (R-Texas) website.

I will reiterate them here: In the end, when it finally becomes apparent that no amount of money-printing, tax hikes or austerity measures will fix the sovereign-debt problems of Europe and the United States, world leaders will meet and agree to two basic steps for the foundation of a new world monetary system

  • Monetize most, if not all, of the Western world's debt (temporarily sending gold to well over $5,000 an ounce).
  • Create a new world reserve currency, tied to a commodity basket and administered by the International Monetary Fund.

I also suspect that at some point, as far-fetched as it may sound, world leaders will also consider a debt-free banking system. One that mimics, at least in part, the Islamic banking system where Sharia law forbids usury and interest and, instead, works on the basis of "Profit-Loss Sharing," or PLS. Put another way, the bank becomes your partner in your home or your business, instead of a lender.

We have a long road ahead of us. But as I said at the outset, I believe the crisis the world is going through will eventually give birth to a better world for all of us.

It just won't be easy getting there. It will be a trip through hell.

Right now, most markets are still consolidating and looking like they will retest important support levels, as I have been expecting. Gold is starting to slide; so are silver, oil and many other commodities.

So while downside is still present, and there are opportunities to make money on the downside, never forget that there is one asset bar none that you should own for the longer term.

It's gold. There is nothing better than gold. If you own gold already, hold, and wait for my signals to add more gold. If you don't own gold, get ready to buy either on a decline back to major support levels, or a full-blown breakout to the upside above $1,823.

Best wishes,

Larry Edelson
ETF Daily News

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe