Global Gold Switzerland talks to Thomas Bachheimer, expert in financial markets and President of the European chapter at the Gold Standard Institute. This is an excerpt from the Global Gold Outlook Report (subscribe here).
Return to national currencies in the EU
When it comes to currencies, one of the favorite topics that Thomas Bachheimer tends to analyze, he believes a return to national currencies is of great benefit to nations. What exactly are the benefts of ending the Euro?
Diferent nations have diferent economic systems and their economic cycles are not in sync. In order to be competitive, nations need free exchange rates so they can devalue or increase the value of their currency as deemed appropriate. This mechanism is not available in a rigid currency system such as the Euro. The surplus countries, such as Germany, and the ailing economies, such as Greece, both sufer because they cannot adjust the value of their currency. Picture a bicycle race in a mountainous terrain: Some cyclists will still be on level ground, while some others are on a steep incline and the advanced group might have already mastered the mountain. Now, imagine that all cyclists have only one gear and thus cannot adapt to the diferent circumstances. Some cannot accelerate on the plain and others cannot shift down gears to get up the mountain. All sufer and nobody benefts. This destroys the entire cycling team – or much worse, the entire Euro area!
The European states are moving towards a cashless society. If this is the way the ECB wants to go, they could use Greece as a test case for negative interest rates, which, by the way, are nothing but theft. The frst lowering of the interest rate due to an economic reason (Greenspan in July 1996) was theft and redistributed wealth away from labor towards capital (from the hard-working to the rich). All subsequent measures (the spiral of intervention) such as QE I- III, ESM, negative interest rates, etc. are only stealing from the defenseless people by those who have planned and managed this monetary system.
Unfortunately, this is like stealing from the peoples’ bank accounts to repay debts without diluting the Euro as a whole.
Oil should be traded in gold, not U.S. dollars
According to Thomas Bachheimer, we have limited resources of oil and an unlimited measurement through the currency that is used to trade it, i.e. the US Dollar. In other words, the amount of circulated US Dollars is increasing, while the amount of oil is dropping. Given that, oil should be traded in gold.
The rationale behind that idea is that we must not trade the most important commodity of the planet with the illusion of a currency that is increased without limit or rule. There is too much playing fast and loose going around with energy prices and consumers. Producers and the investors (in oil exploration and investments) were exposed to unstable circumstances. The pricing of the oil is unfair for most market participants. This is all done to support the illusion of a fat currency that dominates world trade. Therefore, something that is not increasable, honest and independent is needed. In my opinion, we don’t necessarily need gold. We just need something that enjoys the trust of market participants. Unfortunately, I don’t know any other commodity that fulflls the same characteristics based on emergence, extraction, storage, and stock-fow ratio.
Physical gold has strong global demand
Physical gold is flowing in large quantiaties from West to East, particularly China, India and Russia. Why are those countries accumulating physical gold, and are they heading for gold-based currencies?
It is clear to all interested parties, how much gold is moving from West to East. This development started in China. The country has strong economic growth, enormous domestic demand, great export opportunities, and since 2009 they started making a move towards gold. In the beginning, these developments were noticed by the West. However, it was not considered to be important. China has increased their gold reserves from 0.8% to 1.6%. That was not considered to be very much. Only the statement made by the then governor of the Chinese Central Bank, that gold holdings of other state entities could be taken over by the central bank in a matter of seconds, suddenly made people pay attention. Since China is the biggest producer of gold in some quarters, it means the Chinese are able to buy gold relatively unnoticed in the domestic market. It shows that they are serious. Despite being able to buy gold covertly, they gathered what was possible in the world-market. There are many numbers circulating. As a result, a serious estimate regarding the quantity of the Chinese gold reserves is not possible.
It has to be said at this point that China is making a clear step into the right currency direction. However, they do it with caution. They are gradually moving in that direction. However, it’s still a long way from having a gold standard. Nevertheless, they have begun.
Regarding the heartland theory or the Silk Road, we have to understand that China’s and other countries‘ gold will establish trust for the new development bank and therefore afect the future. With all due respect to this theory, I would like to close with the following old wisdom: “He who has the gold, makes the rules.” And the gold is in Asia. This continent will set the fortunes of the world in the 21st century and I believe the downfall of the USA is therefore sealed. We can just hope that the USA will be civil enough to push the reset-button like the USSR did 25 years ago.
Source: “Global Gold talks to Thomas Bachheimer”