Global Monetary Meltdown in 2009 ?

• GEAB is forecasting : Breakdown of the Global Monetary System by summer 2009 ,I have always been a keen reader of GEAB forecasts and they have been exceptionally correct in forecasting the current financial tsunami. Are they off their rockers this time ? 
     
• Quote : “Without a complete overhaul of the system inherited from 1944 by summer 2009, the failing of the current system and that of the United States at the center, will lead the whole planet to an unprecedented economic, social, political and strategic instability, and more specifically to a breakdown of the global monetary system by summer 2009.”  . Sounds right to me ! Sorry fellas, I still belong to the gloom and doom camp.
   
• Are there evidences currently that are foretelling what is to come? Professor Antal Fekete in his articles on the Backwardation of Gold is warning everyone of the upcoming collapse of fiat money also :
   
  RED ALERT: GOLD BACKWARDATION!!!
  Has The Curtain Fallen On The Last Contango In Washington?
  There Is No Fever Like Gold Fever
      
• Essentially, he is saying that the Gold market is indicating that an increasing number of people are exchanging their fiat, paper currencies for physical gold and no amount of persuasion will lead them to part with their physical gold. So confidence in fiat currencies is breaking down and price of gold will skyrocket. Looking at the Backwardation of Gold for the past 2 weeks as shown by him, I  tend to agree with him. 
   
• Why are so many people taking physical delivery of Gold from Comex? The Spot price is higher than the futures (ie Backwardation) and yet the arbitrage has not started : by selling Spot and buying future? This is the normal behavior for traders in this type of market.
   
• Peter Navarro in : China plays beggar thy neighbor, is warning : ” As for the beggar thy neighbor, it has become clear over the past week that Chinese government officials intend to export their way out of the global economic crisis. …..recent downward movements of the Chinese yuan relative to the dollar. ……, this movement represents a “competitive devaluation” designed to boost Chinese exports to the US at the expense of both domestic US manufacturers and competing countries such as South Korea and Japan” 
   

• If China continues on the path of competitive devaluation, the Asian Tigers: Taiwan, Korea, HongKong, Singapore will all feel the pressure to devalue their currencies. The other countries like Thailand, Vietnam, India will also feel the heat. This is on top of an upcoming collapse in the USD.  

• The USD must weaken to increase its competitiveness. The current account deficit needs a weak USD to redress the imbalance. How is Uncle Sam going to pay off all their debts?? My feeling is they will either default or inflate away their debts ie devalue USD vs Gold as FDR did in the 1929 GD.  

• This is the opinion of Frank Beck also : Dollar Devaluation To Fix The Great Recession . The basic idea is that the FedRes is not able to print money out of thin air fast enough, so why not just devalue USD against gold. Since USD is the world reserve currency, it is not practical to devalue it against individual country’s currency. It will be a political  minefield and will lead to trade wars.

• By devaluing against gold (ie revaluing gold price upwards against USD) their debts will be deflated away once inflation kicks in and wages rise. By revaluing gold, the US government’s physical gold reserves of 8100 tonnes will increase in value too and thus help to payoff the national debts (US$ 15 Trillions and rising!). 

• The FedRes will need to revalue gold price very much higher if they want to address the national debt problem. Based on US$800/ounce gold price, the current 8100 tonnes is worth about US$ 210 B. So a 10x revaluation of gold to $8000/ounce may not be sufficient to address the debt of US$15 T and rising. ( This does not include the unfunded liabilities of Social Security and MediCare estimated at US$60T)

• When USD is devalued, I doubt the EU will be able to hold the line. They will follow suit. The EU and all of Eastern Europe is in deep deep trouble. Can they allow their cost to be a great deal higher once the USD is devalued? No! Their economies are in recession and more importantly they need to reflate to combat deflation too. So it will be a worldwide devaluation of all currencies IMO.

• We have already seen many countries/currencies in deep trouble, Iceland Krona, Ukraine, Brazil, Ecuador, Russia… quite a few countries have collapsed or are almost there (Pakistan). Faith in paper money is falling. Is it really so far fetch that there will be a global monetary meltdown in 2009??

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