cross-posted from the Sound Money Center

At the recent Camp David economic summit of world leaders, our President attempted to use his dwindling influence to press European nations to ease up on austerity programs which have ignited a major social and political backlash in countries such as Greece.  His position provides us with an early indication of how austerity measures will be viewed in this nation when the reality of our fiscal situation becomes apparent over the next twelve to twenty-four months.  Austerity will be rejected in favor of the printing press.

This is consistent with history, which shows that when governments have the ability to create money out of thin air, they attempt to print their way out of trouble rather than face reality. Such is the case today. Get ready. The printing presses are about to be unleashed again after a very brief quiet period.

June 17th will be seen as an important date on the timeline marking the destruction of fiat currencies worldwide. Greece will hold elections which are now largely seen as a referendum on whether or not they remain a member of the Eurozone.  If the results follow current polling, an anti-austerity government will be elected which could lead to Greece’s departure.  This possibility – widely denounced as heresy just a few weeks ago – has ignited a “soft” bank run in Greece.  Its citizens are hording Euros in an attempt to avoid the loss of their savings should an anticipated 60% or greater devaluation of a newly issued Drachmas occur.

Greek exit from the Euro or not, the instability in the Eurozone is creating a very sharp selloff of all markets. This means QE3 (round three of Fed money printing) will likely ensue in June. Any selloff in commodities and precious metals in particular will likely be short lived.  As the Fed coordinates with world central banks to flood the world with more of their toxic digital money, the eventual collapse of the dollar moves closer to reality.

Yet that is not all that is happening in the global sovereign debt crisis. The drama in Greece has captured headlines over the past few weeks, allowing a major revelation by the U.S. Treasury Department to escape the public’s attention.  For the first time in history, a foreign nation can now trade U.S. debt directly with the Treasury.  That nation is China.  Our debt master has quietly demanded, and been given access to our Treasury market, bypassing the “primary dealers” on Wall Street.  Why is this significant?

China can now buy and sell U.S. Treasuries without disclosing their activities.  China can now minimize their exposure to the coming devaluation of our dollar and dump their treasury holdings behind the scenes without creating a panic in the currency markets.  Rest assured, the Federal Reserve will happily print the money necessary to accommodate them.

The dominoes continue to fall.  Nations are fleeing our dollar and are getting more creative and bold in how they do it.  Each of us would be wise to do the same.  Got sound money?


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