What’s Left for Central Banks?

Yesterday we posted an article by Jim Rickards on how central banks could possibly use gold to overcome their ‘little’ debt issue.  If the numbers we’ve been throwing at you about this debt issue aren’t sinking in then check out these charts for a ‘picture paints a thousand words’ example (oh, and note the US take-off coincides leaving the gold standard…).  

Ask yourself if that in any way looks sustainable?  Bill Holter happened to write a very similar article last night on the role gold may play in this situation.  Bill puts it in terms of us reaching ‘debt saturation’.  We’ve explained before the Ponzi Scheme nature of fiat currencies and the underlying issuance of debt.  Bill goes on to remind us:

“The problem with "debt saturation" is this, all fiat systems (Ponzi schemes) must have new investors in order to "grow".  This is what is meant when you hear the word "reflate".  The reflation process is always funded by new waves of borrowing.  For years we would see various economic sectors passing the baton of reflation until there were few left with the ability to borrow more.  Then we saw the real estate markets get to a point where more debt could not be added [GFC].  Finally, various sovereign governments and their central banks picked up the baton in a final reflation.  We have particularly seen this since 2008 with the various fiscal spending plans and quantitative easings.”

We’ve also recently discussed the fact that many nations have stopped buying US debt and indeed the likes of China are selling it in great amounts.  So what happens when no one wants to take on more of the debt you need to issue to print your currency?  Saturation.  Bill explains, like Jim Rickards yesterday, that about the only bullet left in the central bankers’ guns is gold.  It may be the only thing left on their balance sheets that they can reflate to save themselves.

In store customers will have seen snippets of the excellent DVD we play in our showroom “End of the Road” and many have bought it off us.  One quote the above reminds us of is Peter Schiff quoting a scene from Superman when Louise Lane falls from the building and he swoops her up mid air.  He says ‘Don’t worry, I’ve got you’; she says ‘Yeah, but who’s got you?’.  The Fed and other central banks have come to think of themselves as Superman.  You may very well be asking Ms Lane’s question….