June 7, 2012 -- ... How will this monster credit bubble be resolved? And when? "This time it's different" is a phrase that finally has meaning. You see, this time it really IS different.
We know that in the past governments have tried to solve their overspending problems with credit and fiat money. We know that none of the fiat money has ever survived. But what does that tell us about the current world, a world awash in fiat money?
It tells me that there's a ghastly train wreck somewhere ahead. At some point, sanity will return to citizens of the world, and they'll start to figure it all out. If fiat money is wealth, then how can any institution print wealth? First skepticism will rise regarding fiat money -- then it will rise towards all fiat money. Somewhere along the line there will have to be a moratorium, a world moratorium regarding money. In the end, people will only trust what they can hold in their clenched fists, or what they can own outright, such as land.
Ultimately, the world always returns to what it knows and trusts. What it knows and trusts is gold. I think there will have to be new currencies that are convertible into gold. Printed paper money will be despised, and the whole fiat currency system will be denounced as a racket.
I think toward the end of the downfall of fiat money, there will be a frantic rush to accumulate gold. The great bull market in gold which has been building rather conservatively for over ten years -- will suddenly come alive and turn speculative. Just as Americans have been basically disinterested in gold, psychology will reverse and turn white hot for the yellow metal...