How Do These Sorts of Crises End?

IMG Auteur
Published : October 27th, 2011
641 words - Reading time : 1 - 2 minutes
( 0 vote, 0/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...
Category : Gold and Silver

Nearing the end of this crisis, some wonderful profitable and productive opportunities will arise...

THERE HAVE been these crises before, writes Paul Tustain, founder and CEO of BullionVault. Somehow they come to an end. What happens?

Sometimes someone turns up who can shore up a collapsing debt mountain, and they make it grow higher, for a bit longer. For a short while they are called brilliant, but they leave a bigger problem than they started with. Eventually the thing comes crashing down and the creditors pay – always.

Whether they pay through default or rapid inflation, or the mandated acquisition of government bonds by their pension fund, or the sequestration of their deposits, the result is the same: it's always the creditor who pays.

And so they should. They lent the money, and they receive interest for taking the risk of lending. It doesn't work well if they can take the interest without the risk – for which we need only look at the nonsense of naked CDSs! No – as some bondholders are currently finding out, the creditor always pays.

By and large the creditors in the west are the holders of about $100 trillion worth of currency denominated assets (bonds and deposits) mostly owned by savings institutions which themselves have been pumped up through tax incentives to save. Their owners are the people who are going to pay. That is good news and bad. Good for our children, who will not be saddled with this debt, and bad for us, as we will get pensions – paid in full – that buy a sandwich a month.

But until the bill finally lands on the mat, lots of earnest arguments and skilful men and women will turn up, occasionally even offering a glimmer of hope that somehow the creditors will not end up paying. Some will usher in false hopes, but the hopes will fade, until eventually – when the debt has finally become near worthless, and when even the savers realise it is so – some lucky individual will announce that the money printing and the devaluation is over. Then suddenly, as if by magic, it will be. This person will be the 20th or the 50th Treasury Secretary to make the announcement, but the announcement will stick, because everyone has accepted that the value of the old debt is finally zero. Only then will growth start over.

All currency denominated assets will by then be effectively worthless. Until then volatility in a generally downwards direction will be the norm as false dawns get debated, and implemented, and fail. It will be very difficult to spot the end of the process, because it will only happen when finally almost everyone assumes every monetary initiative will fail. That is a necessary condition for a return to sensible money.

That – at any rate – was how these things got resolved in the past. It's not very encouraging is it? Sorry.

I find my interest is shifting from the collapse, which is well underway, and which will go on in its chaotic way for a few years and will eventually consume the hugely indebted UK and USA economies, as well as the Japanese and the Europeans. Now I am wondering how to detect the nearing end of the process, when some wonderful profitable and productive opportunities will arise. We will then have the wind at our backs, with sound money and naturally re-emerging demand (albeit from a low base). In the meantime I will sit on my gold through the rises and the falls, and remind myself whenever I'm tempted to sell – which is frequently – that it's the creditors who pay, always. Until they have I must not get involved.

By the way, just in case I didn't mention it: THE CREDITORS ALWAYS PAY.

Ready to buy gold today...?

 

<< Previous article
Rate : Average note :0 (0 vote)
>> Next article
Settlement-systems specialist Paul Tustain launched BullionVault in 2005 to make the security and cost-efficiencies of the professional wholesale gold market available to private investors. Designed specifically to meet his own gold ownership needs as a risk-averse investor, BullionVault now cares for over US$1bn of client gold property, all of it privately owned in the client's choice of low-cost, market-accredited facilities in London, New York or Zurich.
Comments closed
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Sometimes Things Turn
14 JunThemis
When humans try to do it all using their own strength and 'wisdom', we screw up royally. Let us remember that we have a powerful God and humbly tu...
The CFTC’s Summer Camp Letter
14 Junsonora691
I have followed the daily and intra-day prices of silver for most of the last 10 years. I am not a speculator, but a small investor interested in m...
Sometimes Things Turn
13 Junsonora693
I would like to thank you for turning a hundred years of American history into a succinct and subjective account of what has gone wrong in this co...
Sometimes Things Turn
11 JunS W.2
When a country like the USA does all the things that third world countries do, then by default it ends up in the third world.
Sometimes Things Turn
11 JunGypsy1
Being a "working stiff" I didn't start to notice The Turn until Foley and the Democrats would never stand up to Regan and Voodoo Economics. It was...
Going Where, Exactly?
10 JunJ.
I wonder where history will put the collapse. Like a recession, the collapse of a society is only apparent long after it is underway. Some, such ...
Trump’s Last Stand
08 JunS W.
I don't think China will be too worried about tariffs . They are getting on with business in the silk road with about 100 countries so they wi...
The CFTC’s Summer Camp Letter
02 JunS W.
I assume that Mr Butler has accumulated stacks of silver bars at artificially low prices and at some time in the future he will sell all his silver...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS