About global currencies vicious cercle of decline

Here is a simple explanation of the inevitable decline of currencies and the rise of gold for the last 30 years.

The consumerism society and the monetary privileges have pushed political leaders to always increase government spendings. It is legitimate for citizens to want a better life but this has increased dramatically the debt of occidental countries. Because of the same cause, less spending in research and developement has damages the technological competitiveness of those countries.

As a consequence, more money has been invested to buy imported goods but there were no longer investment to build products of high added value and this has brought more deficit in the trade balance. More debt has lead to the decline of the dollar. In order to cope with the decline of the dollar, more emerging countries are buying euros and gold. Euro is now estimated to be 20% of the reserves of central banks. Because of this, the price of the Euro is rising.

A a result, exports become more expensive, it becomes more difficult for european indutries to sell abroad but  imports become cheaper, inflation is slowing and it becomes more easy to consume. Under pression of the citizens who wants a better life, the Euro Zone political leaders increase the debt to continue supporting the living standards of its people (rich and poor).  The Euro’s trade balance is growing negatively and countries on the long run are pluging in debt.

Once countries are too endebted, it has to cut spendings. Cutting spendings leads to a decline of growth domestic product and to recession. When recession occur, there is no other way than to take more debt until the currency collapses.

Currently, this vicious cercle is perjudicial because emerging countries’ GDP is growing while the GDP of USA, UK, France, Spain, Germany have been lower than other countries for the last 15 years.

If western countries stop this now, and go back to the Gold Standard, USA and EU will rebuilt great, stable competitive and future orientated economies. Gold is the only reliable trading measure (Greenspan) and it will always be (already for 2000years). No other material can have this function. Not oil, not wood, not water, not diamond… USA and EU possess more than 2 thirds of the gold of the world. The market automatisms are currently bringing gold back to its real value.

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