Gold, Credit and the Coming Financial Collapse
The comments below are an edited and abridged synopsis of an article by Hubert Moolman
The current decline in the monetary base has not turned into a decline of the money supply yet, but it soon will, especially if the economy goes into a recession and the stock market collapses.
The monetary base is the foundation of the money supply, and represents the most liquid part of it. It basically acts like gold in a 100% funded gold standard: It represents the final settlement of a transaction.
If the monetary base is declining, there is less available to service debt, and mass defaults could be triggered. Cash becomes scarce, and the Fed has to intervene in the repo market, as it has been doing, just to keep the system going.
This problem won’t go away without a major crisis and severe consequences. The banking system is broken, and is unable to continue creating new credit in its current form, just like a bank is unable to increase its gold holdings under a gold standard when there is distrust of the banking system or that particular bank.
The reserve banks don’t control all the elements in the system: They are not all powerful and unstoppable. The appetite or ability to take on new credit is just not there anymore. Their intervention is not to make the crisis go away, because it won’t, but to protect their interest during the crisis.
Moolman discusses the beginning of the expected monetary event; a chart shows the ratio of the gold price to the St. Louis Adjusted Monetary Base back to 1918 (the gold price in US dollars divided by the St. Louis Adjusted Monetary Base in billions of US dollars).
The bottom is now virtually confirmed, and we could soon have an event similar to the 1933 gold confiscation (bankruptcy) and the 1971 announcement where the US ended the dollar convertibility to gold.
Although both events were significant, they did not occur during a stock market crash or during a recession, which could happen this time.
