The world’s most important financial market is unraveling.
We’re not talking about the stock market or the bond market.
This market is 40 times bigger than the stock market—yet you rarely hear about it in the mainstream media.
Without it, the global economy couldn’t function. And right now, it’s undergoing a massive shift.
In today’s Dispatch, we’re taking a close look at the global currency market.
As we’ll show you, all of the early warning signs of a global crisis are there…but the good news is that it’s not too late to start protecting yourself today…
• Last week’s “Brexit” vote rattled the global currency market…
As you probably know, Great Britain voted to leave the European Union (EU) last week. The “Brexit,” as the media is calling it, wiped out more than $3 trillion from the global stock market between Friday and Monday.
According to Standard & Poor’s, it was the biggest global stock selloff in history (surpassing the previous record of $1.9 trillion set in September 2008).
The decision sent shockwaves throughout the global currency market.
The British pound plunged 8% on Friday. It was one of the pound’s worst days ever. It’s now trading at the lowest level in three decades.
Other major currencies experienced wild moves too. The euro fell 2.4% on Friday. The yen surged 4.5%. And the U.S. dollar rose 2.2%.
These are enormous one-day swings.
But it wasn’t just last week…
• These extreme moves have been happening for two years now…
Since 2014, we’ve seen major fluctuations in the world’s most important currencies.
The value of the euro has swung 33%. The U.S. dollar has swung 27%. The Japanese yen has swung 24%.
Currencies in commodity-producing countries have been even more erratic. The Australian dollar’s value has swung 38% since 2014. The Canadian dollar has fluctuated 37%.
• The global currency market wasn’t always this volatile…
That’s because America, the owner of the world’s most powerful paper currency, once used the gold standard.
Under this system, the value of the U.S. dollar was directly linked to gold. Every dollar was worth a fixed amount of gold. Since gold has real value, this gave the dollar a true, stable value.
But the U.S. government ended the gold standard in 1971. The U.S. and every other country on the planet now use a “fiat” money system, meaning the value of their paper money is based on nothing but confidence. Governments can now print money at will.
• World governments have “printed” more than $12 trillion since September 2008…
Central bankers created this cash using a radical policy known as quantitative easing (QE). That’s when a central bank creates money from nothing and pumps it into the financial system.
The U.S., the European Union, and Japan have all tried to stimulate their economies with QE.
It’s failed every time. The U.S. and Europe are growing at the slowest pace since World War II. Japan’s economy hasn’t grown in two decades.
Unfortunately, central bankers haven’t just manipulated the supply of money.
• They’ve warped interest rates too…
Dispatch readers know interest rates aren’t just some arbitrary number. They’re the “price of money.”
When rates are high, money is expensive. That tells folks it’s a good time to save money. When rates are low, money is cheap. That’s when you want to borrow money.
Interest rates are the traffic signals of the economy. They direct money to where it should go.
But interest rates only work when the market sets them. When governments manipulate rates, they send false signals, tricking people into making bad decisions on how to invest, save, and spend money.
• Central banks have cut rates more than 650 times since the 2008 financial crisis…
Now, every major economy on the planet has rock-bottom interest rates.
In the U.S, rates have been near zero since 2008. Europe and Japan have negative interest rates.
If you’ve been reading the Dispatch, you know negative rates are the latest radical government policy. They basically flip your bank account upside down. Instead of earning interest on the money you keep at the bank, you pay the bank to store your money.
Negative rates are a perversion of capitalism. They’re the type of thing that could only exist in a world run by idiotic politicians.
Of course, the government tells us negative rates are for our own good. According to mainstream economists, people will spend more money if you penalize them for saving money. This will “stimulate” the economy.
It hasn’t worked.
Folks in Europe and Japan are hoarding cash to avoid paying negative rates. In both economies, sales of home safes are soaring.
• In an effort to fix the global economy, central banks have made it more fragile…
In the aftermath of Friday’s stock market bloodbath, the Bank of England (BoE) pumped £3.1 billion into its banking system. The Bank of Japan (BOJ) injected $1.5 billion into its banking system.
The emergency stimulus measures helped to calm investors’ nerves. The FTSE 100 index, Great Britain’s version of the S&P 500, has rallied 10.0% since Monday. The STOXX Europe 600 Index, which tracks 600 large European stocks, is up 7.6%. The Japanese Nikkei 225 is up 2.4%.
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• But these emergency cash injections didn’t actually fix anything…
All they did was buy the government time.
You see, after eight years of unprecedented money printing and rate cuts, the global financial system is hooked on easy money. Like any junkie, it’s built up a tolerance. The easy money “highs” don’t last as long as they used to. And every hit must be bigger than the last.
Still, central bankers will keep the easy money flowing. The BoE has already pledged to pump £250 billion into its financial system. On Monday, Japan’s Finance Minister said he would “take various, aggressive responses to ensure stability in financial and currency markets.”
We don’t trust these “geniuses” at the Federal Reserve, BoE, and BOJ to keep our financial system safe. They’re conducting a gigantic global monetary experiment that they can’t control. And as we showed you earlier, their reckless actions have already begun to destroy the value of the currencies they’re supposed to be defending.
• We encourage you to prepare for the coming currency crisis today…
The best way to protect yourself is by owning physical gold.
Gold is real money. It’s preserved wealth for centuries because it possesses a unique set of characteristics: It’s durable, easy to transport, and easily divisible. Gold also has intrinsic value. It doesn’t depend on “confidence” like paper money does.
Most importantly, governments can’t create more gold whenever they want. Gold’s value often jumps when governments do reckless things like use negative rates or print money.
This year, gold has soared 26%. It’s at its highest price in two years. But it’s likely headed much higher. Casey Research founder Doug Casey thinks gold could easily triple in the coming years. If things get really ugly, Doug says it could shoot to the moon.
If you do anything to protect your money from desperate governments, own gold.
For other ways to safeguard your wealth, watch this short presentation. It explains how violent currency moves—like we’re seeing today—have preceded some of the worst financial disasters in history. By the end of the video, you’ll know why you can’t afford to ignore the warnings we’re seeing right now. You’ll learn how to protect yourself and profit from the coming crisis. Click here to watch this free video.
Chart of the Day
Negative interest rates have made the world a bizarre place…
Today’s chart shows the annual interest rate for Japan’s 10-year government bond. You can see its yield has plunged over the past three years.
These bonds now have an annual interest rate of -0.23%. If you own one of these, you have to pay Japan’s government 0.23% every year you hold the bond.
The only way to possibly make money on these bonds is to sell them for more than you paid. You have to pass them off to a “greater fool.”
Also, as we mentioned above, Japan’s economy hasn’t grown since the 1990s. But that hasn’t stopped its government from going on an epic borrowing binge. Japan’s current government debt-to-GDP ratio is a staggering 250%, by far the highest in the world.
In other words, folks who own these bonds are paying to lend money to a broke government.
We don’t see how this can go on for much longer. At some point, folks will realize the paper money system is broken.
Delray Beach, Florida
July 1, 2016
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