By Peter Costa

For over 3000 years from the formation of banking to the creation of currency there have been 2 systems that have ruled. One of these systems has been beneficial to a small group who has sought to control the money supply while the other has been beneficial to the whole. Civilization has gone back and forth between these 2 systems for centuries and a great deal of time and energy has been spent keeping it beneficial to a small group. After diligent research I have come to see that practically every economic catastrophe happening globally right now can be traced to the current monetary system every developed nation operates from.

The 2 systems we have gone back and forth from for centuries can be broken down into a backed monetary system and a fiat monetary system. All monetary systems that have ever existed have been either one. A backed system is when a monetary exchange is backed by something such as gold or precious metals thus limiting the expansion of the money supply. With a backed system it is difficult for the money supply to expand rapidly because it is based on the reserves that are held. When a system is backed and has limitations to the expansion of money it becomes beneficial to the whole and can create a lot of stability in the economy. When a monetary system is backed it makes it very difficult to manipulate the money supply. A fiat system is exactly the opposite of a backed system this is a monetary exchange that is backed by absolutely nothing. In a fiat system currency is typically issued by a ruling entity such as the government and is backed up or enforced by jail time or fees if not accepted. Normally this exchange is paper money or some other form of portable currency that is hard to replicate or forge. With a fiat system the money supply can be expanded as often as needed because there is absolutely nothing backing it. This type of system is typically manipulated and beneficial to a small group rather than the whole. Throughout history fiat systems have failed and have never worked. Fiat systems have been the catalyst for the rise and fall of many great nations.

The current system most developed nations are on right now including the United States is a fiat system. A majority of the currencies being issued today are backed by absolutely nothing. When you boil it down they are useless pieces of paper that are on a path of no return and will soon be used as nothing but paper to light a fire. The Wymore Republic and Former Soviet Union have been the most recent prey for this type of a system and the whole global economy will soon follow. For a fiat monetary system to properly exist there needs to be a central banking system put into place. A central banking system is setup where you have an entity such as the Federal Reserve commonly known as a central bank, print up the countries money and all banks in the nation are attached to this one reserve. The alarming thing with this setup is that the central bank is never owned by the government it is typically owned by bankers or private investors. This system is beyond faulty and can create a lot of volatility in an economy and cause everything from depressions to recessions. The most detrimental part of this setup is that it promotes fractional reserve banking. Fractional reserve banking is when a bank loans out more money than they have in deposits. As recent as the Clinton administration days banks were encouraged to loan out more money than they had and were given a 1 to 9 ratio. How a 1 to 9 ratio works is for every $1 a bank receives in deposit they are allowed to loan out $9. Ever since banking was formed this has been a standard practice between banks. On a backed system it is harder for banks to indulge in this type of practice because if word got out depositors would take all their funds from the bank causing a bank run. A fiat system with a central banking system put into play protects banks from this threat because it acts as a reserve and has all banks in the nation attached to it. If there were any threat of depositors taking out large sums of money they would simply cover that bank. This in itself is the recipe for economic instability and an eventual currency collapse because it allows banks to artificially inflate the money supply.

Now that you understand how the system works let me explain what this type of system enables. For decades now the United States has been on a fiat monetary system. In this type of a system the name of the game for banks is to get as much money out into the economy in the form of loans as they can. Many companies have understood this and have used it to their advantage. Companies have been lining up at banks to receive loans for their companies. With these loans they create companies, include the citizens of the United States in the workforce and start to become an asset or liability on the banks balance sheet. As the years go on these companies run out of money and keep going back for more loans so that they can pay off the outstanding ones. Due to banks wanting to keep money out in the economy they continue lending these companies money giving them enough to pay back interest on the loans and survive for a little longer. Before you know it these companies get to a level where they are “too big to fail” and if they were to go bankrupt they would take the bank down with them. So companies start spending lavishly and keep going back to the banks when they run out of money. This is why companies like AIG and countless others have been able to continue to exist. They have borrowed so much money from the banks and if they were to go bankrupt they would take the bank with them. This exact same scenario has been replicated with individuals through mortgages. Countless banks in attempt to keep money out in the economy have taken individuals who should not have mortgages and approved them. When the individual can no longer make payments they apply for another loan or restructure their mortgage driving them deeper into debt. As long as the money continues to stay out in the economy the bank is satisfied. The problem with this whole type of practice is that sooner or later it all falls apart because everything has a breaking point. This exact scenario has been the catalyst for our current economic state. All that is unfolding right now was lead by sub prime mortgages faltering where scores of individuals could no longer afford their mortgages and had to walk away. Once this happened the bank’s game of artificially expanding the money supply was up. With so many people defaulting on their mortgages banks were no longer able to loan money freely which leads to more loans defaulting and sooner or later it all unravels into what we are currently experiencing.

The jig is up and banks are being forced to close their doors for business. Now you can start to understand why over 195 banks have failed in the last 2 years and why 26 have already filed for bankruptcy in 2010. In addition there are 500 more banks on the troubled list that will soon face a similar fate. One of the biggest banks in the country is on the list which is Citigroup who have over $1 trillion in assets. Effective April.1st, 2010 Citigroup is going to need 7 days notice for anyone making a withdrawal from a saving, checking or money market account. The scary thing is this is already effective in Texas and they have been warning depositors about this since the start of the 2010. This is only the beginning and many more banks will follow suit as more loans default and depositors want to withdrawal their holdings. The only problem with this whole thing is that it is not the banks that suffer from this practice it is the people. Like these large companies that have become too big to fail many of the banks have become too big to fail. We are now in a situation where if certain banks were to fail our currency would collapse. That is why banks will now start exercising the right to take up to a week to provide you with money from your accounts because the government has no choice but to bail them out in hopes that this will all turn around. So far out of $600 billion plus used to bail out troubled banks $537 billion of it has been handed out in executive bonuses. “The banks have no remorse for the current economic crisis and are going to guarantee hyper inflation in the coming times which will lead to a currency collapse” stated Ronald Fricke president of Regal Assets in response to the current banking crisis. As we print more money to solve these situations it only devalues the dollar guaranteeing inflation. If things continue to escalate we will face hyper inflation which if not handled correctly could render our currency useless. As you are probably starting to understand this economic crisis is so inner woven.

As much as it pains me to say this, at this point it may be better off for the United States if the currency collapsed rather than continue to bail out the banks. This would free us up from the web our banks have spun and allow us to start off anew. There are too many things holding back any kind of economic recovery and as Obama put it when he first stepped into office this thing is much deeper than anyone could possibly imagine. The only system that has ever offered stability and the only time period where the United States deficit was completely paid off is on a backed system. All the way up until 1933 the United States was on a backed system and with manipulation from the certain parties we were transferred over to a fiat monetary system. When this system gives way and a new one is introduced rest assured it will be a backed system. If you look around you will already see this beginning. A currency collapse is inevitable in the United States and for the first time in over 30 years countries have started to buy gold in an attempt to back their currency. China is leading the way and plan to purchase over 6000 metric tons in the next 3-5 years. This alone is going to cause the demand for gold to sky rocket thus making it more and more difficult to acquire. If you have not already started backing your green back with gold now is the time.

Related posts:

1. Fiat Currency Is Doomed To Fail
2. Fiat Money Paving The Way For Hyper Inflation

By Peter Costa

Since 2008 the US economy has been hit with a wrecking ball. It started with sub prime mortgages faltering and has escalated into a credit crisis. From toxic mortgage debt to the banking crisis unfolding, the US economy has been in need of surplus capital. In the last 2 years with the combined private bailouts and stimulus packages we have spent well over $2 trillion trying to keep the economy afloat. As each year passes the need for capital is only compounding. Our deficit is at an all time high and projections for the future seem grim. As new budget plans are purposed for 2010 we can start to gauge where the year will take us and how close we are to hyper inflation.

With only 2 months into the new decade the US government has been working rigorously trying to revive the US economy. A purposed $3.8 trillion budget plan is floating around congress and is grossly inflated from years passed. Behind all the fancy wording and political jargon we all know that the rescue efforts are nothing short of continuing to pump money into the system in hopes of recovery. This plan is similar to an individual applying for more credit cards to cover the current outstanding ones or a Ponzi scheme bringing in more money to pay off old debts. Like the later everything has its breaking point and sooner or later we will hit that point. With unemployment numbers at an all time high this has been the main focus of the new budget plan. If the US government gets their way we could see a $3.8 trillion budget plan passed this year. Why is this alarming? It does not take a mathematician or renowned economist to know that this is going to lead to hyper inflation. You cannot print up $3.8 trillion and avoid devaluation of the dollar it is next to impossible. We have lost confidence with our major lenders such as China and have seen many countries begin to abandon the greenback.

China has lost such confidence in the US dollar that for 5 months now they have stopped purchasing US treasuries. On Tuesday, 16th February, the US Department of the Treasury released Treasury International Capital [TIC] data for December 2009. It revealed that China sold over $34 billion US Treasuries in December 2009. With this recent news China is no longer the largest holder of US debt they have passed the title to Japan. “For over a decade now China has increased their US Treasury holdings by 8 fold, it is extremely alarming that they are now dumping them and paints a picture of where our economy is heading” stated Ronald Fricke president of Regal Assets. A tsunami of Treasury auctions are set to take place this year, amounting to a total $2 trillion to fund this year’s budget deficit. The Fed is likely to monetize a sizable portion of this debt due to the difficulty the Treasury will face off-loading such a large quantity onto the market. This would have been an easy feat in the 90s or the first half of the last decade, but with the debt ceiling now in excess of $14 trillion, the market will soon realize that buying US government debt is not “risk free” with a default likely. If we are not able to unload the required Treasuries on foreign countries, citizens of the United States may be the next target. There is a bill that is currently being passed around congress that is looking to nationalize retirement plans where if approved will make it mandatory for individuals to place a portion of their retirement holdings in US Treasuries. This will be a devastating blow to the individuals that have already incurred massive losses on their retirement plans and could cause major chaos. As lofty of a bill as it may be I am appalled that forcing Treasuries on US citizens would even be an option.

Based on what has been unfolding since 2008 I am not saying that gold and silver are going to do well I am insisting that they are going to do well. Hyper inflation is the next logical step in our recovery plan and for the people pulling the strings I do not feel that they have even taken into account the devastation it will cause. More importantly I am convinced that who ever is pulling the strings does not care about the US or the dollar. The more I research the more I feel that this may be a carefully orchestrated collapse. In any event we need to wake up and turn our useless pieces of paper into honest currency that cannot be manipulated by government. It is time for us to preserve what we have worked so hard for. Social Security? Not likely. IRA and 401Ks? Not all of it. For centuries royalty and the elite have been preserving their wealth in precious metals. It is time to follow suite before you get left with the short end of the stick. No one else is going to get our back, it is literally left up to us to take action.

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Banking Crisis Continues

By Peter Costa

The banks in recent times have become a black hole sucking away any chance of dollar recovery in the United States. Since 2008 we have seen the banking crisis unfold and snowball into a colossal mess. As 2010 starts to unravel we need to keep an eye on the banking crisis because it will be an indicator of where things are heading financially. Banks are a crucial part of our financial system and if they continue to fail the green back will not be far behind.

From 2008 to 2009 we have seen 195 banks fail leaving over 500 on the troubled list. Regulators closed 140 banks last year, the highest level since 1992 when officials were still cleaning up from the savings and loan crisis. Community banks are facing persistent pressure from deteriorating loans, many tied to commercial real estate projects that have collapsed or are in decline. With only six weeks into 2010 the banking crisis is compounding from the prior year with over 15 bank seizures as of January. The last Friday of January saw 6 banks fail in a single day this is the exact same number of bank failures that happened in the entire month of January for 2009. The banking crisis is only escalating from last year and projections for the future seem grim. In 2008 we saw 1 bank fail in the month of January; in 2009 that number quintupled to 6 and now over 16 banks have failed for January 2010 leading us down a road of no return. With statistics like this hyper inflation is inevitable and could start to rear its ugly head shortly.

FDIC Chairman Sheila Bair has said in the current banking crisis that bank failures will peak in 2010. FDIC expects the insurance fund’s balance will remain negative until 2013 but says it has plenty of access to cash, including the ability to tap a $500 billion line of credit with Treasury. Ronald Fricke president of Regal Assets stated last week that the FDIC is down to less than a billion in their insurance fund promising to insure over $6.3 trillion in assets and will have no choice but to tap into their credit line with the Treasury.

Hyper inflation at this point it is an unavoidable reality. The dollar is only growing weak and the US economy is demanding more and more of it. The banks are the back bone of our financial system and if they start to give out we will all face an undesirable circumstance. With the banking crisis leading the way for financial meltdown the time to move your money into a tangible asset is now. Never in the history of the United States have we been faced with such a crisis and those who do not protect themselves properly will end up getting pennies on the dollar. Gold is an asset that has been used for centuries to protect people from the greed and manipulation of money supplies. With gold prices where they are currently you could not be in a better buying opportunity.

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By Peter Costa

There could not be a better time to buy gold coins. There has been a slight correction in the price of gold making it an ideal buying opportunity. This is an extremely temporary situation and before we know it gold will be breaking record highs. For years I have been advising individuals to get into gold and thus far my deductions have been correct. Recently I have received a lot of questions regarding gold and many have been asking if it is too late to get into the yellow metal. This is an excellent question and is something I am going to solely address in this article.

We all know the US economy faces major challenges in the coming times and these challenges are only going to escalate as the year unfolds. Hyper inflation seems to be right around the corner and our global neighbors are proving this to be correct. The US is a major player in the global community and anything that happens here will cause a domino effect elsewhere. If you pay close attention to the global community you will start to see a similar trend taking place that leads to nothing less than the rising price of gold coins making this time an unbelievable buying opportunity.

Recently there has been an influx of new buyers in the gold market place. You have been lead to believe that the largest purchasers are institutions and hedge fund managers but this is untrue. The largest purchasers of gold right now are countries. For the first time in decades countries are beginning to buy gold in an attempt to back up their currencies. This alone signifies that it is not too late to get into gold coins and that current prices are nothing short of a buying opportunity.

Last year alone India picked up 200 metric tons of gold from the IMF making it the largest gold purchase from a country in over 30 years. Since India made its purchase central banks around the world have been increasing their gold reserves. You would think with India making such a large purchase that they were the leaders for increasing their gold reserves in 2009 but they were actually second. China was the largest gold recipient in 2009 increasing their reserves by 454 metric tons. Following China and India was Russia increasing their reserves 111.8 metric tons. Additional countries to take note of are listed below:

1. 454 Metric Tons (China)
2. 200 Metric Tons (India)
3. 111.8 Metric Tons (Russia)
4. 16.6 Metric Tons (Phillipines)
5. 10 Metric Tons (Sri Lanka)
6. 5 Metric Tons (Mexico)
7. 2.6 Metric Tons (Belarus)

The gold rush has only begun and China is said to be leading the way. Ji Xiaonan, who chairs the supervisory board for big state-owned companies under the State Council’s state assets commission, was quoted saying “We suggested that China’s gold reserves should reach 6,000 tons in the next 3-5 years and perhaps 10,000 tons in 8-10 years”. In response to the statement by Ji Xiaonan Ronald Fricke president of Regal Assets said “If China increases their gold reserves to 6000 metric tons in the next 3 years this will push gold prices to over $2100 an ounce.” China is already on track for this goal and in 1 year has added close to 500 metric tons of gold to their already plentiful reserve.

As more and more countries pick up gold there will soon be a shortage. In over 5000 years we have only been able to amass about 160,000 metric tons which is enough to fill two olympic sized swimming pools. Keep in mind that we never throw gold away it is either kept or melted down and turned into something else. It is very possible that the gold coins you own may very well have been a piece of jewelry from ancient Egypt or even the Mayans. If you have ever played a game of musical chairs you know the reality of short supply and that somebody is always left out of a chair. A similar game of musical chairs is happening right now and while countries are quietly trying to pick up gold soon enough someone is going to come short and the true ascend for gold will begin. If you are sitting in the green back in hopes of a dollar recovery I am afraid you will be very disappointed with the results. It is time to quietly get out of the green back and into gold coins before you lose the option to do so.

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3. The Truth Behind The Dollar And The Value of Gold

By Peter Costa

With a new decade upon us one cannot help but ponder the direction we are heading in as a whole. It seems like we are in a relentless circle of repetition doomed to repeat the same mistakes our previous generations fought to overcome. As we step into this new day and age we need to open our eyes to the reality of things versus the illusions we have been made to believe. When you turn on the television today you are inundated with the constant smoke and mirrors used to shield us from the truth. Allow me to remove the smoke and mirrors from you and share the reality of our economy as we step into this new decade.

Last year we saw many events unfold that have crippled our economy and contributed to the unavoidable reality we will all soon face which is inflation. Inflation has been caused by fiat money and is an underestimated effect that has resulted in the death of many nations which in more recent times includes the Wymore Republic and Former Soviet Union. It is the catalyst for economic uncertainty and if not handled correctly could render a currency useless launching a nation into complete financial meltdown. Here are the top 3 events unfolding in the US that are leading us down the path of hyper inflation:

1. The Banking Crisis

The banking crisis alone is a burdensome situation that could ignite hyper inflation in the coming times. Since 2008 we have had 195 banks file for bankruptcy. In 2009 over 140 banks failed and included the 6th and 10th largest bank failures in the United States history abducting billions in assets and drying up the FDIC insurance fund. FDIC is down to less than $10 billion in assets promising to insure over $6.2 trillion in deposits. How deep does this thing go? Well let’s just say that Neil Borofsky who is heading up TARP said the banking crisis alone could cost us $27.3 trillion to fix. Ronald Fricke president of Regal Assets says this number is more than the cost of all the wars the US has ever fought combined and is the most that has ever been spent on a single effort in American history which amounts to $80,000 for every US citizen. To make matters worse last year Citigroup reported a second quarterly profit of 4.3 billion but the figure included the $6.7 billion after tax profit from its sale of Smith Barney. If you exclude this onetime event the bank lost 3.4 billion. Similarly BofA showed a profit of $2.42 billion but this figure included the $5.3 billion from its sale of shares of China Construction Bank without this BofA would have reported a massive loss. To make matters worse over 515 banks are on the troubled list and could face bankruptcy this year as well as 35 ongoing criminal and civil investigations of suspected account, securities and mortgage fraud is taking place. You would think with this kind of pressure the banks would be walking on egg shells… that is far from the case. In lieu of such a horrendous year the banks decided to hand out over $587 billion in bonuses to their executives. Is this AIG all over again? These bonuses alone could have paid off every state in the US debt including California or saved mortgages for another 2 years. Needless to say the government has applied pressure to the banks in revealing where the money went and have been struggling to receive answers. The banks know that this fiat money is doomed to fail and according to them there is nothing in the constitution that requires them to reveal this information.

2. Rising Unemployment

It is no surprise that unemployment is at the highest it has been in over 26 years. From September to December 2009 over 538,000 jobs were lost taking unemployment to over 10% nationwide. We all know that 10% is the public number and the reality of the situation is more like 17%. With over 1 million Americans on unemployment it will not be long before they start getting cut off. In fact this year alone we could see as many as 200,000 Americans cut off from unemployment because their pay period has come to an end. This event will muscle thousands of unemployed citizens to cash out of their retirement plans thus pulling money out of the stock market forcing another major drop in the markets. To make matters worse a slew of mortgages are about to renew on houses that are already worth half their value. Mix that in with the increasing unemployment numbers and you get a surge of individuals abandoning their properties and mortgages triggering another wave of the mortgage crisis guaranteeing hyper inflation. The current debt the mortgage crisis is sitting at is around $1.75 trillion.

3. Unaccounted For Bailout Money

Since 2008 copious institutions and companies have been lining up to receive government bailout fiat money. We have seen AIG, Chrysler, GM, Ford and major banks come to Uncle Sam in an attempt to keep things afloat. The result has lead to multiple stimulus packages including a $787 billion package followed by a $1 trillion package. Where does that lead us to today? Over 90% of the money being unaccounted for! The government has been scrambling to figure out who has what and has spent close to $25 million in an attempt to receive answers. We all know that the $152.8 billion given to AIG was used to hand out over inflated bonuses to their executive and treat themselves to lavish days out on the town including a day at the St. Regis Hotel and a hunting trip in Europe. With the banks we know over $537 billion has been handed out in executive bonuses and substantial amounts sent oversees to various institutions in an attempt to invest money in foreign entities and recover their losses. It safe to say that over $600 billion has been dedicated to compensating the lousy executives that helped create this problem in the first place. The already $1.8 trillion that has been dedicated to placing scotch tape and band aids on the holes of the economy is only going fend off the inevitable for so long.

To summarize everything, with the banking crisis, rising unemployment and government bailouts alone we are looking at well over $30 trillion just to keep things afloat not even chipping away at our deficit as a whole. This is the catalyst for an unavoidable expansion of the money supply which will result in hyper inflation. It is time to look back at all the civilizations and nations that have tried to use fiat money as a monetary exchange and you will see that it has never worked. Having a useless paper currency backed by absolutely nothing is the primary reason why so many great nations have failed including Rome. In the history of our world not one nation has made fiat currency work and the US will face a similar fate. With gold prices where they are today you could not be in a better time to transfer your wealth into the only honest money the world has ever had.

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2. Fiat Currency Is Doomed To Fail
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