QUESTION: Today employment came with 195K.
1- If Europe is imploding, China slowing, Emerging markets slowing, is the US employment story sustainable?
2- After the governments bond collapse beyond 2015.75, could USA devalue the dollar and make a combination of bond default with a new currency?
3- Is physical gold in the allocated form in a Bank a safe way to keep it?
Thank you very much.
ANSWER: The question ASSUMES that people on Capitol Hill even agree there is a problem. If you try to talk about stuff like that, they will NEVER listen and look for the tinfoil hat. These people are in “power” and the idea that they are the problem does not cross their mind. They do not even consider a default, devaluation, or a change in currency. You are assuming WAY TOO MUCH mental capacity.
These types of economic crisis unfold in slow-motion. It is not rapid in the least. Each event is like a domino. One must push the next down. We MUST see Europe and Japan fall first. That puts the pressure upon the dollar sending it higher, and that turns the US economy down as was the case between 1981 and 1985.
European structure could not have been worse. We needed a consolidated debt and that would have created the reserve currency if Eurobonds existed. Leaving each state with its own debt created a single currency without any reserve capability. It is market DEPTH the creates the reserve status. Yes China would like to create that status, but until we stop the borrowing, the US dollar remains the global reserve currency and that will never be displaced regardless of China simply allows its currency to float. It is more than that – it is DEPTH.
European structure is the worse of every possible world. They will try to roll out Eurobonds after the German election, but here too, they miss the point. For Brussels to simply borrow is not the solution. You cannot have a reserve currency with fragmented financial markets. China cannot reach the reserve status regardless how many deals they cities are allowed to begin currency trading in the yuan. You need a sizable market and China is not there yet.
Only when the dollar soars to new highs, blows all the dollar loans out of the water, at last we will see the start of meaningful reform. Nobody will reform anything until there is no choice. US banks would turn over whatever gold they have of your in a heartbeat if the government said to do so. Therefore, US banks are not to be trusted from that perspective.
