When Central Banks Fail, Who Survives?

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Most of our readers are aware of the tenuous state the world economy is in today. Central banks continue to print with reckless abandon, propping up asset prices around the world, especially those in the stock market. We all know the party is going to end at some point. When, we don’t know. Nonetheless, it’s useful to engage in a brief thought exercise pertaining to who wins out when it all comes crumbling down.

First, I want to be clear that central banks can sustain current state for and unsustainable amount of time. Their power, especially when their powers are combined and coordinated, are nearly invincible and omnipotent. These are the real masters of the world of finance and their clout both in the financial and political world cannot be underestimated. With that said, the system will eventually need to purge itself, the central banks are not invincible, and some sort of value will rise from the ashes. Just don’t be surprised if it takes far longer than you could ever imagine for this to happen due to the aforementioned capabilities of the banks.

Now, when we do reach “D-Day”, I think one of three solutions will rise out of the mayhem: Bitcoin, Gold (and silver), or a combination of both. First, there is Bitcoin. Bitcoin is the decentralized and pseudonymous currency you heard so much about in the news last year but have found sentiment waning of late. Regardless of current events, Bitcoin quite simply gives the general populate the ability to transmit value almost instantly and without intermediaries. It’s inflation proof (capped at 21 million in supply) and is not subject to the whims of central banks…and this is why I think it could be the winner when the fiat currency system fails. When this thing goes down its going to be epic and people will be open to innovative alternatives. Bitcoin fulfills the world of money quite nicely in a globalized world and this low cost medium may reign king when the dollar is no longer one.

The next possibility is transitioning towards a gold / silver backed currency after the “fall”. This could happen as it has happened in the past – an honest currency backed by hard assets like gold is a reliable barometer of value. Yet, I don’t think this will work in the new world. Yes, I know China and Russia and buying gold hand over fist but I think this is more of a hedge for the falling dollar – a medium to get their wealth to the “other side” of the economic collapse you could say. Gold will get your wealth through the storm and could serve as the basis for a new system, but I don’t think it foster the transfer of value in future state.

The combination of precious metals and digital currencies is where I start getting excited. Bitcoin is here to stay and it’s backed by nothing by a network of mathematics and trust in value transmission. If someone came along and combined the ease of use of Bitcoin with the wealth preservation of gold & silver I think we have a global winning combo. Problem being the banks probably wouldn’t like this too much and getting to this point will require a hell of a ride through central bank fueled liquidity and the ensuing crash.

Prepare for the reset – it’ coming. When? Who knows – but pick your horses wisely. Do you like fiat, gold, bitcoin, or both? But, never forget that the central planners can hold this all together for far longer than any of us think. Those traders say “Don’t fight the Fed” for good reason.

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