The Lost Century

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“In November 1910, some powerful US bankers joined by the influential Paul Warburg had a meeting on Jekyll Island that would determine the destiny of the world financial system and the world economy for over 100 years. This infamous meeting led to the creation of the Federal Reserve System in the US on December 23, 1913.

The Fed was created by private bankers for the benefit of private bankers and today, 100 years later, they have been more successful than they could ever have imagined in 1913.

Not only have they created a system that efficiently controls the world financial system for their personal benefit but also world politics. They totally understood the advice of Mayer Amschel Rotschild, the founder of the Rothschild banking dynasty, who famously proclaimed:

“Give me control of the nation’s money and I care not who makes its laws.”

So for exactly 100 years now, the Fed and other central bankers have totally destroyed all major world currencies and left the world with debts that cannot and will not be repaid with normal money. And whilst achieving this unprecedented wealth creation for the top level of financiers, they have in the last 15 years also managed to enrich almost every single individual who works in Wall Street in New York or in the City in London. In 2008 the financial system almost collapsed had it not been for an injection of printed money, debt and guarantees by governments and central banks to the level of $25 trillion. Banks like Goldman Sachs, JP Morgan and Morgan Stanley would not have survived without this massive liquidity infusion. But even that year when these banks were on the verge of bankruptcy, most bankers received a similar bonus to the previous year.

At the same time, wages for ordinary people in the US, UK and many Western countries have hardly increased in real terms for decades. Normal people have a perceived increase in living standards due to a massive increase in personal debt as well as government debt – debts that they of course can never repay.

Now don’t get me wrong, I have nothing against bankers. I have a few in my family. But I know that the system which was created 100 years ago is untenable. It will not only lead to an implosion of the financial system and the value of assets financed by the credit bubbles. It will also lead to misery and famine for a lot of people in the world. And empty stomachs are likely to lead to social unrest in many countries.

A lot has been written about the centenary of the Fed in the last few weeks so rather than adding to this, I am showing a couple of graphs that tell the story very well.The first chart (courtesy World Gold Council) shows the destruction of paper money since 1913. This is what the Fed and other central banks have achieved. All major currencies have declined between 97% and 99% including the dollar which is down 98% in real terms which of course is measured in gold.

The destruction of paper money

CurrenciesinGold100years

Click chart to enlarge

As we all know, gold is the only real money and cannot be destroyed. What is absolutely guaranteed is that many currencies and especially the dollar will go down the remaining 2-3% and reach their intrinsic value of ZERO in the next few years. The dollar does not deserve to be the world’s reserve currency and will soon lose that role. And gold will reflect this decline of the dollar and go to heights which are unthinkable today.

The next chart (courtesy Goldman Sachs) shows the total failure of central bank intervention in trying to eliminate peaks and troughs in the economy. The chart shows 10 year US Treasury yield from 1790 to 2013. Between 1790 and 1913 interest rates fluctuated between 3% and 8% with very few violent swings. Since 1913 we have seen swings in the 10 year rate of incredible proportions going from a low in 1945 of 1.7% to 15.8% in 1981 (with Fed Funds at 20%) and down to 1.6% in 2012.

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