Wednesday, April 23, 2014

The World Will be Forced Back on to a Gold Standard

I don’t think there’s any central bank in the world today that wants a gold standard, but they may be forced to go to a gold standard to restore confidence. In other words, right now the dollar’s the leading reserve currency. I’m expecting that in the next dollar panic, the next financial liquidity crisis, which will happen sooner than later, it’s going to be bigger than the Fed.

Meaning the Fed bailed out the world in 2009, but the next crisis is going to be so much larger because the size of the system is larger and the Fed has already trashed its balance sheet by printing $4 trillion in the last five years. What are they going to do? Print another $4 trillion? I mean they’re at the outer limit of what they can print. So the next crisis is going to be bigger than the Fed. The Fed will not be able to re-liquefy the world, so where is global liquidity going to come from in the panic?

The answer is the IMF because they have the only clean balance sheet in the world and everyone knows that the Fed has a printing press. They can print dollars, but people don’t know that the IMF also has a printing press. They can print world money which they call special drawing rights or SDR’s, and so you re-liquefy the world by printing SDR’s, and that’s what the elites would like to do.

But it may not work in the sense that if people are losing confidence in dollar paper money, why would they have confidence in IMF paper money? Well, it might work if no one understands it, which is what the elites are hoping. But in fact, people might not have confidence in it. In that world, you may have to go to gold. Central banks may have to go to a gold standard, not because they want to, but because they have to.

- Source, Jim Rickards via Sprott Money: