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The G-20's Secret Debt Solution this weekend !

The G-20 may propose devaluing all currencies, including the U.S. dollar and the euro.

If the G-20 monetizes at least 20% of the U.S. debt markets, gold could easily hit $10,000 an ounce.

MONEYANDMARKETS
The G-20's Secret Debt Solution
by Larry Edelson

If you think this weekend's G-20 meetings in Washington are only about designing short-term fixes to the financial system and regulatory reforms for banks, hedge funds, brokers, mortgage companies and investment banks ... think again.Behind the scenes, a far more fundamental fix is being discussed — the possible revaluation of gold and the birth of an entirely new monetary system.

I've been studying this issue in great depth, all my life. And given the speed at which the financial crisis is unfolding, I would be very surprised if what I'm about to tell you now is not on the G-20 table this weekend.Furthermore, I believe the end result will make my $2,270 price target for gold look conservative, to say the least. You'll see why in a minute.

First, the G-20's motive for a new monetary system: It's driven by and based upon this very simple proposition ...

"If we can't print money fast enough to fend off another deflationary Great Depression, then let's change the value of the money."
I call it ...

"The G-20's Secret Debt Solution"It would be a strategy designed to ease the burden of ALL debts — by simultaneously devaluing ALL currencies ... and re-inflating ALL asset prices.That's what central banks and governments around the world are going to start talking about this weekend — a new financial order that includes new monetary units that helps to wipe clean the world's debt ledgers.It won't be an easy deal to broker, since the U.S. is the world's largest debtor. But remember: Debts are now going bad all over the world. So everyone would benefit. Fed Chairman Ben Bernanke ... Treasury Secretary Paulson ... President Bush ... President-elect Obama ... former Fed Chairman Paul Volcker ... Warren Buffett ... and central bankers and politicians all over the world agree a new monetary system is needed.
So they'll start hashing out the details to get the new financial architecture deployed as quickly as possible.If you think I'm crazy or propagating some kind of conspiracy theory, then consider the historical precedent ...To end the Great Depression in 1933 Franklin Roosevelt devalued the dollar via Executive Order #6102, confiscating gold and raising its price 69.3%, effectively kick starting asset reflation.Only this time, it won't be just the U.S. that devalues its currency. The world is too interconnected. Instead, the world's leading countries will propose a simultaneous and universal currency devaluation.This time, they will NOT confiscate gold. There would be riots all over the globe if they even mentioned the "C" word.But they don't have to confiscate gold. Here's one scenario ...They cease all gold sales and instead, raise the current official central bank price of gold from its booked value of $42.22 an ounce — to a price that monetizes a large enough portion of the world's outstanding debts.Internal Sponsorship

That way, just like in 1933, the debts become a fraction of re-inflated asset prices (led higher by the gold price).And this time, instead of staying with the dollar as a reserve currency, the G-20 issues three new monetary units of exchange, each with equal reserve status.The three currencies will essentially be a new dollar, new euro, and a new pan-Asian currency. (The Chinese yuan may survive as a fourth currency, but it will be linked to a basket of the three new currencies.)The new fiat monetary units would be worth less than the old ones. For instance, it could take 10 new units of money to buy 1 old dollar or euro.New names would be given to the new currencies to help rid the world of the ghost of a system that failed. Additional regulations and programs would be designed and implemented to ease the transition to a new monetary system.

The International Monetary Fund (IMF) would implement the new financial system in conjunction with central banks and governments around the world. Keep in mind that the IMF is already set up to handle the transition, and has had contingency plans allowing for it since the institution was formed in 1944.Included in the design and transition to a new monetary system ...A. A new fixed-rate currency regime. Immediately upon upping the price of gold and introducing the new currencies, a new fixed exchange rate system would be re-introduced. The floating exchange rate system would be tossed into the dust bin along with the old currencies.This would kill any speculation about further devaluations in the currency markets, and drastically reduce market volatility.B. To sell the program to savers and protect them from the currency devaluation, compensatory measures would be enacted. For instance, a one-time windfall tax-free deposit could be issued by governments directly to citizens' accounts, or, to employer-sponsored pensions, to IRAs, or Social Security accounts.Income taxes may subsequently be raised to pay for the give-away, or a nominal global type of sales tax could be enacted to help pay for the new system and the compensatory measures.C. Additional programs would be designed to protect lenders and creditors. Lenders stand a much higher chance of getting paid off under the new monetary system — but with a currency whose purchasing power would now be a fraction of what it was when the loans were originated.So programs would have to be designed to help lenders offset the inflationary costs of their devalued loans, probably via the tax code.Naturally, all this is a bit more complicated than I've spelled out above. But that gives you a big-picture outline of what the plan could look like. And I think major changes like these are going to be set in motion at this weekend's G-20 meetings in Washington.Would they work?Yes. They would help avoid a repeat of the deflationary Great Depression. But don't expect even a new monetary system to put the U.S. or the global economy back on track toward the high rates of real growth that we've seen over the last several years. That's simply not going to happen. Not for a while.External Sponsorship

Instead, I'm talking about a massive asset price reflation, negative real economic growth in the U.S. and Europe — but continued real GDP gains in Asia.The Big Question: What gold price would be legislated to reflate the U.S. and global economy?I can't tell you what gold price the G-20 would ultimately agree to. But here's what they will be looking at ...
To monetize 100% of the outstanding public and private sector debt in the U.S., the official government price of gold would have to be raised to about $53,000 per ounce.

To monetize 50%, the price of gold would have to be raised to around $26,500 an ounce.

To monetize 20% would require a gold price a hair over $10,600 an ounce.

To monetize just 10%, gold would have to be priced just over $5,300 an ounce.

Those figures are just based on the U.S. debt structure and do not factor in global debts gone bad. But since the U.S. is the world's largest debtor and the epicenter of the crisis, the G-20 will likely base their final decision mostly on the U.S. debt structure.So how much debt do I think would be monetized via an executive order that raises the official price of gold? What kind of currency devaluation would I expect as a result?I would not be surprised to see the G-20 monetize at least 20% of the U.S. debt markets. THAT MEANS ...
Gold would be priced at over $10,000 an ounce.

Currencies would be devalued by a factor of at least 12 to 1, meaning it would take 12 new dollars or euros to equal 1 old dollar or euro.

The return of the Gold Standard? "But Larry," you ask, "how could this be accomplished when we no longer have a gold standard? Further, are you advocating a gold standard?"

My answers:First, you don't need a gold standard to accomplish a devaluation of currencies and revaluation of the monetary system.By offering to pay over $10,000 an ounce for gold, central banks can effectively accomplish the same end goal — monetizing and reducing the burden of debts, via inflating asset prices in fiat money terms.Naturally, hoards of gold investors will cash in their gold. The central banks will pile it up. At the same time, other hoards of investors will not sell their gold, even at $10,000 an ounce. But the actual movement of the gold will not matter. It is the psychological impact and the devaluation of paper currencies that matters.Second, I do NOT advocate a fully convertible gold standard. Never have. There isn't enough gold in the world to make currencies convertible into gold. It would end up backfiring, restricting the supply of money and credit.What should you do to prepare for these possibilities?It's obvious: Make sure you own some core gold, as much as 25% of your investable funds.

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Very interesting thoughts.

Very interesting thoughts. I wonder how such a thing would play out in every day life. If you are earning $10.00 an hour now, are you earning a $100.00 dollars an hour next week, while all prices get an extra zero tacked on? Sounds almost like carting around wheel barrow loads of pesos. Any speculation on what would happen to foreign currencies that are not currently traded on the Forex, like the Iraqi dinar?

Pat

BOHICA!!

Pat

BOHICA!!

Welcome to the new system

Welcome to the new system same as the old... All this guys is saying is inflation is much higher then anyone thinks and in order to compensate in gold it should be priced a $53,000 an once. I actually think that is low.

He still doesn't get it fully. He say he doesn't advocate a full gold standard because there is not enough gold to convert the currencies and it restricts credit.

That's exactly the point numb nuts it's fiat credit bubbles that are the problem with monopolies on the currencies by an elite few. Also of course there is not enough gold to convert the fiat currencies because they are way over inflated and too much of it circulating i. e ads in a credit bubble. The credit does need to be restricted because when it's not thats what causes the boom bust cycles and the mess we are in.

A gold standard cuts up the credit card. One thing inadvertently illustrated in the article is holders of gold win either way.

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Every normal man must be tempted at times to spit on his hands, hoist the black flag, and begin to slit throats. H. L. Mencken

Get Prepared!

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End The Fat
70 pounds lost and counting! Get in shape for the revolution!

Get Prepared!

This dude has been thinking!

One thing is for sure, these folks aren't meeting just to discuss the fuel milage of their Bentleys. A new monetary system is coming. The old one is crashing around us, and it's not just the good old US of A. All theses central banks are printing like crazy. That's why we've been able to get by with doing so for so long, but now, it's becoming obvious the scheme is breaking up. Who knows what scam they'll fleece us with next. Look at what's shaking now: Your stocks, your job, your retirement, your cash, your credit.....and just about everything. Keep a tidy little stash of tangible assets, be it gold, silver, guns, tools. Things that don't really wear out, or go valueless.

alan laney

What's the difference?

If gold is priced at $10,000 per ounce in a new devalued currency (12 to 1 ratio) or at $800 per ounce in the current dollar value?

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...In Liberty

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RON PAUL 2012

The difference is... you

The difference is... you will lose a lot of wealth if the currency is devalued and all of your savings are held in that currency. If you start out with $1000, and the currency is revalued to 10% of it's previous value, your $1000, will be worth $100. If you move the $1000 to gold, and the currency is subsequently devalued, you will end up with $10,000, which is worth the same as the $1000 you started with. Sure, gold won't gain you any wealth, but it sure as heck will protect it.

Bzzzzt! Next...

They devalue the currency nominaly, not the purchasing power.

You are subtracting zeros, and comparing as if devaluation erases $900 of cash value. This can only work if the dollar value before and after valuation stays the same (FYI - this would be considered theft on a grand scale!).

Devaluation adds zeros to your current cash holdings. However, you can only buy the same amount of stuff with it as before the devaluation. Ex. $1000 devalued to 10% of it's worth now becomes $10,000. That's the magic of fiat currency, assign to it any value you want! Only now a gallon of milk costs $45.00 instead of $4.50. Look up Zimbabwe.

So again, what's the difference if I can buy or sell an oz. of gold for ~$800 current value or an oz. of gold for ~$10,000 devalued (based on 1/12 valuation).

Answer that, or this post is simply scare mongering. "GOLD TO GO TO $10,000!!!" Sure, if they devalue the currency anything is possible. Gold could go to $100,000 if they wanted it to, but the fiat monetary units would be devalued in proportion.

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...In Liberty

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RON PAUL 2012

more clarification please

That makes sense and doesn't it make sense to say you would indeed be wealthier relative to the vast majority who didn't to this? Isn't that the greatest benefit? You'd have 10 or 12 times (as in the example) as much wealth in that respect than all your neighbors who are still holding $800 cash. Is that correct?

Would it also be correct to say if this happened all of our debts would remain the same balances as before the devaluation? If yes, wouldn't a person who had gold reap a windfall there as well in that they could choose to take a portion of that added wealth and wipe away a lot of debt?

"Do you want to know who you are? Act. Don't ask. What you DO will delineate and define you." - Thomas Jefferson