EDITOR'S NOTE:
Several nations are de-dollarizing, and it’s beginning to look hostile. What we’re currently seeing, according to Willem Middelkoop, founder of the Commodity Discovery Fund, is not just any plain economic war. He claims it’s more like a financial World War Three. According to his view, the world financial system is about to be reset, and the US is a primary target.
Okay, but…Getting rid of the dollar as the world’s reserve currency system may be a lot harder than it sounds. Middelkoop doesn’t acknowledge this reality, and the article below touches upon this fear as if it’s something that can happen overnight as if the global monetary system can be recalibrated at the flip of a switch. It can’t.
But global monetary risks, aside from the toppling of the dollar, are real. The weakening of the dollar, whether through external or internal forces, highlights the need for a sound monetary anchor. The IMF’s solution is the issuance of SDRs, particularly digital SDRs that operate like central bank digital currency. The other option is to reinstate a more functional role for gold; something that central banks have never completely abolished considering that gold makes up a portion of their foreign currency reserves. Middelkoop makes a few more valid arguments peppered with an equal share of alarmist rhetoric. But overall, it’s worth a read.
Source: Kitco News
China currently considers Taiwan a rogue province and has stated that re-unification with the island is a top national priority.
"Most of [the military experts] say that China will move [towards action against Taiwan] within five to ten years. China is looking and studying what happens to Russia and don't want to make the same mistake. Don't forget, China is gaining a lot more power without firing a shot because they control Russia now. Without China, Russia is gone, financially," he said.
On current monetary conditions, Middelkoop said that a "severe recession" is on the horizon, and the Federal Reserve will likely realize a monetary policy pivot once they understand this economic risk.
Commenting on the recent 75 basis point rate hike this week, he said that "I think the Fed was really scared by the way inflation took off. Actually, central banks are a bit cornered because they printed so much money to stimulate the economy and to solve each and every crisis in the last two decades, and now the inflation is red and they need to act now, so they need to move fast and take big steps. But, while they do this, the economy is cooling off quite a bit and if you read the reports from real estate in the U.S., I think a recession is close, could be a severe recession, and once the Federal Reserve understands that there could be a severe recession underway and prices are going down because of these recession risks, then they might pivot and stop raising rates sooner rather than later."
He noted that in a few months to weeks, people will get more stressed about the state of the U.S. economy.
On investment implications, Middelkoop said that we are moving towards Bretton Woods 3.0, which "is a monetary system centered around commodities, you can expect the price of commodities to keep rising, you can expect the value from a geopolitical point of view to keep rising, you can expect the position of gold to become more important."
Importantly, gold could also be reintroduced into the world financial system and be "revalued".
For more information on how the Federal Reserve has talked about suppressing the gold price in the past, and for the appropriate asset allocation percentage into gold and Bitcoin, watch the video above.
Follow Michelle Makori on Twitter: @MichelleMakori
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