Its the end of the paper world as we know it

We are witnessing the beginning of the end for paper money. Everything we warned of is about to take place. In fact, it is already taking place. And we are willing to bet our bottom nugget on it.

The Euro had done relatively well up until now because the market believed the European central bank (ECB) would not be able to print euros at will. Developments over the past week have proven otherwise. The ECB and the Euro bureaucrats in Brussels decided that the debt of weaker members, commonly – yet derogatorily – referred to as PIIGS (Portugal, Ireland, Italy, Greece, and Spain), will be bailed out with freshly printed money from their central bank. The ECB says it will ‘sterilise’ this EUR printing, but this means they must sell US dollars to mop up the EUR liquidity, and who wants dollars except Americans?

Throw into the mix the currency swaps announced between the central banks of the world’s major financial centres – Federal Reserve, Bank of England, Swiss National Bank, Bank of Canada, Bank of Japan – and it becomes evident that every major paper currency is going to be printed to inflate away burdensome debt. These currency swaps will give global central banks the ability to intervene in their domestic currency markets, in order to devalue their currencies without excessive volatility.

Think about what the ECB’s promise to print money to save these governments means. Whereas bailout packages such as the US TARP two years ago was supposed to be spent on building roads, bridges, and employing people, the ECB’s ‘bailout’ is a bailout of bloated pustules of bankrupt governments across Europe. Money is being printed to buy old and new government debt to support ever-increasing government spending, to keep government jobs, and to let people sit on the dole and draw a paycheck paid for by productive people.

What gold is telling us today is that productive people in Europe – like the Germans – are exchanging their EUR savings for gold because governments cannot tax physical gold as it can its own paper money through money printing and reduced interest rates. Gold is making all-time highs in the US dollar, the Euro, the Japanese Yen, the Swiss franc and the pound sterling, exactly the currencies that are being debased at the fastest rate.

What this means to you as a little guy in the global market is that the value of that little piece of paper you hold in your hand, popularly referred to as money, will buy less and less ounces of tangible assets over the long-run. Soon, prices of everything will go up. Equities. Gold. Oil. Food. Medical costs. Cars. Haircuts. You name it, except government bonds and paper money. If you are a pensioner or about to retire soon, it may mean that what you receive in form of a pension may be worth a whole lot less than you anticipated. If you are a youngster today weighing up the option of investing in a retirement annuity, it means hyperinflation will tax 100% of this pension before it is paid out. The only safe place to store the purchasing power you have worked hard for is in gold or other precious metals.

We will all soon be witness to one of the most meteoric rises in the gold price in the history of mankind. Sound epic? It will be. But at least it’ll make sense to you, and even as the end of the paper world as we know it swings around, you may just feel fine.