Gold, Silver Safe Havens as Economic Growth Meets Finite Planet

Quote Albert Allen Bartlett, “The greatest shortcoming of the human race is our inability to understand the exponential function.”

For anyone who thinks “Economic Growth”, increasing consumption/GDP is normal and can continue like it has done for past four or five decades then let me disabuse you from that idea….

We live on a finite planet and there are only a fixed amount resources we use every day that have allowed us to grow our economies for nearly two centuries but to a greater extent in the last four or five decades. Contrary to our belief in technology and innovation and in a knowledge economy, fossil fuels are the main reason that has allowed us to live and maintain our current standard of living. Anyone who thinks fossil fuels are going to be replaced by anything better or similar is deluding themselves. In the unlikely event that something could replace our use of fossil fuels primary for transport fuels, the amount of lead-time that this would entail would be at least a decade. If anything, corporations themselves would have being preparing for this decades ago.

A little bit of history on growth and oil production. There was one problem with this concept in the earlier years. We were about to see the growth of manufacturing, production, trade, commerce, “growth” in everything. The oil companies in those earlier years were shouting at the manufacturers to get making more stuff. The manufacturers and industry were saying the banks won’t lend us the money. In those days there was a fixed amount gold and a fixed amount of paper receipts for gold.

So the banks broke the link between gold and paper receipts. The receipts became backed by less gold, the final culmination being in August 1971 when the American president, president Nixon severed the last link between gold and its paper receipt, the U.S. dollar. The rest is history. What’s interesting about 1971 is that it was also in that same year when American oil production peaked. This is a matter of public record. I don’t think this was coincidence. Since then we’ve seen agreements like the Washington Agreement, and other world trade agreements. We’ve seen a World Bank, a World Trade Organisation and the International Monetary Fund. All these were and still are backed by American corporations which gave them access to the world’s resources. Primarily, these were and still are poorer countries but rich in resources.

So if American oil could peak in production then wasn’t it inevitable that some day the same would happen with global oil production? Well, as it happens, global oil production stopped increasing (growing) from around 2004/5. What followed in financial markets was that traders realised what was happening. They began to speculate on the price of oil and in July 2008 the price went all the way to $147.50/bbl. The speculators then went short the market and the price fell. Since then it appears the global economy has gone into contraction.

To note, central banks have loaned all today’s money into existence with interest. But since around 2004/5 because there has been no growth i.e. an increase in the amount of labour, capital, goods & services in the world to match the increase in the money supply and QE (and “what ever it takes”) the current system has stopped functioning.

Here’s the crux for everybody. To live in a functioning economy without future growth we must return to using gold or silver or something else as money. I am of the opinion that this is already work-in-progress around the world contrary to reported “currency wars”. Like with previous eras when gold was used as money where most people had probably never seen gold but unknown to most of them they were using paper money as receipts for gold. This time should be no different. That’s why it’s vital people protect their wealth with actual gold or other hard assets before gold itself is re-priced and once again re-monetised.

Understanding that “economic growth” is over as will be “globalisation” and “long distance transport”, we will see more “localised economies”, “local banking” and “local money” i.e. backed by gold or silver without a need for central banks. To note, people who are alive today aren’t going to see the end of what is termed by some as “The Industrial Age” but we are in for shocks along the way as this plays out sometime before the end of this century. Our future standards of living will be lower but if we get this right in all of our countries and communities people will hopefully live a higher quality of life.

by GoldCore Contributor, David Watters

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