When growth slows in capital markets, the bankers’ daisy-chain of credit and debt breaks down; setting in motion defaulting debt which ends in recession, deflation or, in extreme cases, a deflationary depression.
A deflationary depression is a fatal monetary phenomena where the velocity of money—circulating credit and debt—falls so low capital markets are no longer self-sustaining. This happens after the collapse of massive speculative bubbles such as the collapse of the 1929 US stock market bubble which resulted in the world’s first deflationary depression, the Great Depression of the 1930s.
Throughout history, gold and silver have offered safety in times of economic chaos. Today is no different. What is different is the response of governments and bankers to the collapse of the current economic paradigm—the bankers’ war on gold.
In the midst of the Great Depression, the US passed the 1934 Gold Reserve Act which prohibited the ownership of gold by US citizens, forcing Americans to keep their wealth invested instead in capitalism’s paper assets.
The Gold Reserve Act outlawed most private possession of gold, forcing individuals to sell it to the Treasury, after which it was stored in United States Bullion Depository at Fort Knox and other locations. The act also changed the nominal price of gold from $20.67 per troy ounce to $35. This price change incentivized foreign investors to export their gold to the United States, while simultaneously devaluing the U.S. dollar in an attempt to spark inflation.
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